COINSURANCE AND YEARLY RENEWABLE TERM REINSURANCE AGREEMENT BETWEEN AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY West Des Moines, Iowa AND HANNOVER LIFE REASSURANCE COMPANY OF AMERICA Orlando, Florida

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Exhibit 10.12

COINSURANCE AND YEARLY RENEWABLE TERM REINSURANCE AGREEMENT

BETWEEN

AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY
West Des Moines, Iowa

AND

HANNOVER LIFE REASSURANCE COMPANY OF AMERICA
Orlando, Florida

COINSURANCE AND YEARLY RENEWABLE TERM REINSURANCE

ARTICLE		PAGE
I.	PREAMBLE AND REINSURANCE PROVIDED	3
II.	TERM, TERMINATION AND RECAPTURE	3
III.	REINSURANCE COVERAGE	4
IV.	REINSURANCE PREMIUMS AND EXPENSE ALLOWANCES	5
V.	COINSURANCE RESERVES	6
VI.	LOSS CARRY FORWARD BALANCE	6
VII.	NET SETTLEMENT ADJUSTMENTS	7
VIII.	FINANCIAL COVENANTS	7
IX.	REPORTS AND REMITTANCES	9
X.	NET RETAINED LINES	9
XI.	EXCLUSIONS	9
XII.	INSOLVENCY	10
XIII.	ARBITRATION	11
XIV.	AGREEMENT, AMENDMENTS AND MERGER	12
XV.	MISCELLANEOUS	12
	SIGNATURE PAGE	14
	Schedule A1—SUBJECT BUSINESS CONTRACTS (TYPES)
	Schedule A2—ASSETS IN SEGREGATED ACCOUNT
	Schedule B—BASE RATE BY AGE (NEAREST BIRTHDAY)
	Schedule C1—TARGET LOSS CARRY FORWARD BALANCES
	Schedule C2—ALTERNATIVE TARGET LOSS CARRY FORWARD BALANCES
	Schedule D—SAMPLE NET SETTLEMENT CALCULATION AND REPORT FORMAT

ARTICLE I: PREAMBLE AND REINSURANCE PROVIDED

1.01 -		This is an Agreement of Coinsurance and Yearly Renewable Term Reinsurance between:
AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY West Des Moines, Iowa (hereinafter referred to as the "Company") and HANNOVER LIFE REASSURANCE COMPANY OF AMERICA Orlando, Florida
(hereinafter referred to as the "Reinsurer") whereby, the Reinsurer agrees to indemnify the Company for Covered Losses paid by the Company subject to all of the terms and conditions of this Agreement.
ARTICLE II: TERM, TERMINATION AND RECAPTURE
2.01 -		Effective Date: The Effective Date of this Agreement shall be 12:01 a.m., Central Standard Time, November 1, 2002.
2.02 -		Term: This Agreement shall remain in force and the Term of this Agreement shall be from the Effective Date until the earlier of (i) the date of decrement of the last contract holder of a Subject Business agreement, or (ii) the Recapture Date.
2.03 -		Termination and Recapture: The Company may terminate this Agreement and recapture all Subject Business reinsured hereunder at any time after June 30, 2003 by providing written notice to the Reinsurer by registered or certified mail, return receipt requested, at least one-hundred-twenty (120) days in advance, such notice to include the effective date of termination and recapture.
		The Reinsurer may terminate this Agreement only if the Company fails to pay any amount due to Reinsurer by Company hereunder when due, subject to thirty (30) days' notice and demand for such payment by the Reinsurer.
		The date on which this Agreement is terminated by the Company or by the Reinsurer as set forth in this Section 2.03 shall hereinafter be referred to as the "Recapture Date". On the Recapture Date, the Company shall pay to the Reinsurer the LCF from the last Accounting Period and as determined in accordance with Article VI below adjusted to include interest and applicable Risk Charge through the Recapture Date (the "Recapture Payment"). The parties acknowledge and agree that the Recapture Payment is made based upon the scheduled LCF (whether on Schedule C1 or C2, as applicable), and the parties agree to true-up the Recapture Payment by calculating the actual LCF as of the Recapture Date utilizing actual earned investment rates on the Assets, mortality experience, reserves, Funds Withheld Balance, and Experience Refunds in which case the parties agree to promptly pay the amount owing to the other based upon such true-up calculation. In the event the parties disagree as to the true-up calculation, the parties agree to submit the calculation to Milliman USA (Atlanta office), whose calculation shall be final and binding upon the parties, and whose costs and expenses the parties agree to share equally. Except for amounts owed, if any, by the Reinsurer to the Company pursuant to the true-up of the Recapture Payment, on the Recapture Date the Reinsurer shall be released from all past, current and future liabilities under this Agreement, except as expressly reserved by either of the parties. The true-up calculation shall occur within thirty (30) days after the Recapture Payment is made.

	To eliminate any doubt regarding the calculation of the Recapture Payment, the parties may look to the Letter of Intent dated December 19, 2002, between them as evidence of the manner in which the Subject Business may be recaptured and payment made to the Reinsurer.
ARTICLE III: REINSURANCE COVERAGE
3.01 -	Coverage:
	(a)	Section A—Coinsurance (Funds Withheld Basis): The Reinsurer shall indemnify the Company for Section A Covered Losses paid by the Company.
	(b)	Section B—YRT: The Reinsurer shall indemnify the Company for Section B Covered Losses paid by the Company.
3.02 -	Subject Business: Subject Business shall mean all contracts issued by the Company and listed on Schedule A1 attached hereto and incorporated herein. The coverage pertains only to that portion of the 2002 Subject Business not previously reinsured.
	It is understood and agreed that the Company shall continue to administer the Subject Business during the Term of this Agreement.
3.03 -	Subject Losses:
	(a)	Section A Subject Losses shall mean all benefits paid by the Company to contract holders of the Subject Business contracts, including surrender values paid, death benefits paid, and interest and premium bonuses credited in accordance with the terms of such Subject Business contracts. Section A Subject Losses shall not include rider benefits, extracontractual payments, extracontractual damages, loss adjustment expenses and other benefits not expressly specified under the terms of the Subject Business contracts.
	(b)	Section B Subject Losses shall mean all surrender charges waived by the Company upon death of the contract holders of the Subject Business contracts, but only as respects that portion of the Subject Business that is not reinsured under Section A of this Agreement.
3.04 -	Covered Losses:
	(a)	Section A Covered Losses shall equal six and 88/100 percent (6.88%) of Section A Subject Losses on Fixed Annuity policies.
	(b)	Section B Covered Losses shall equal (i) ninety-three and 12/100 percent (93.12%) of Section B Subject Losses on Fixed Annuity policies and (ii) one hundred percent (100%) of Section B Subject Losses on Equity Index Annuity policies.
	The Reinsurer's aggregate liability under this Agreement for Section B Covered Losses shall not exceed fifty million dollars ($50,000,000).
	(c)	The sum of Section A Covered Losses and Section B Covered Losses shall hereinafter be referred to collectively as "Covered Losses". Section A Covered Losses and Section B Covered Losses shall pertain only to that portion of 2002 Subject Business not previously reinsured.
3.05 -	Coinsurance Funds Withheld Reserve. During the effectiveness of this Agreement and while the Reinsurer has reinsurance obligations to the Company hereunder, the Company agrees to maintain Assets in a segregated account, as listed in Schedule A2 hereto, with a book value (determined in accordance with Statutory Accounting Principles) at least equal to the Funds Withheld Balance.

	(a)	The Funds Withheld Balance shall equal the Coinsured Reserves for the Subject Business, as adjusted for the Net Settlement Amount determined in accordance with Article VII below.
	(b)	The Company agrees to promptly supply the Reinsurer with investment reports, in a mutually agreed to format, compiled by a nonrelated third party detailing the Assets that are being maintained to back the Funds Withheld Balance.
	(c)	The Funds Withheld Balance shall accrue Interest at a rate equal to the actual investment income realized on the Assets comprising the Funds Withheld Balance, including capital gains and losses, which shall be offset by a change in IMR (but only IMR created after the Effective Date).
3.06 -	Crediting Rates. The Company will be responsible for determining credited rates regarding the Subject Business; provided, however, that the Company shall notify the Reinsurer in writing of all credited rates as and when determined by the Company and the Reinsurer shall have ten (10) Business Days during which to object to any proposed increase in credited rates which case the Company shall not implement such increased credited rates. The parties agree to cooperate with each other to resolve the objections identified by the Reinsurer as soon as practicable to permit the Company to implement mutually agreeable credited rates of the Subject Business. To the extent the Reinsurer does not object to the credited rates within such ten (10) Business Day period, the credited rates of the Subject Business determined by the Company shall be deemed approved by the Reinsurer and the Company shall have the right to implement such credited rates. The Company agrees not to reduce credited interest rates of the Subject Business below contractual minimum levels.
ARTICLE IV: REINSURANCE PREMIUMS AND EXPENSE ALLOWANCES
4.01 -	Reinsurance Premium:
	(a)	Section A Reinsurance Premium shall equal six and 88/100 percent (6.88%) of all single, first-year and renewal premiums received by the Company for the year 2002 on Subject Business.
	(b)	Section B Reinsurance Premium shall equal, for the Accounting Period commencing January 1, 2003, and each Accounting Period thereafter, the sum of the following:
		(i)	for each Subject Business contract in force, the applicable rate from Schedule B attached hereto and incorporated herein, based on the contract holder's age at the nearest birthday at the beginning of that Accounting Period, multiplied by the Net Amount at Risk at the beginning of that Accounting Period; and
		(ii)	a policy fee of eighteen and 75/100 dollars ($18.75) for each Subject Business contract in force at the beginning of that Accounting Period.
		"Net Amount at Risk" as used herein shall mean, as respects each Subject Business contract, the amount by which the account value payable to the beneficiary upon death of the contract holder exceeds the cash surrender value at such time.
	(c)	The sum of Section A Reinsurance Premium and Section B Reinsurance Premium shall hereinafter be referred to collectively as the "Reinsurance Premiums". The Reinsurance Premiums for each Accounting Period shall be due and payable from the Company to the Reinsurer as part of the Total Settlement for that Accounting Period in accordance with Section 9.05.

4.02 -	Expense Allowances:
	(a)	Section A:
		(i)	For the year 2002, the Section A First Year Expense Allowances shall equal the portion of the Section A Reinsurance Premium paid for that Accounting Period that relates to single and first-year premiums received by the Company.
		(ii)	For each Accounting Period in 2003 and later years, the Section A Renewal Expense Allowances shall be equal to 86/100 dollars ($0.86) per contract plus 6.88% of the applicable premium taxes and agent commissions actually paid by the Company with respect for each Subject Business contract in force.
		The Section A First Year Expense Allowances and the Section A Renewal Expense Allowances for each Accounting Period shall hereinafter be referred to collectively as the "Section A Expense Allowances".
	(b)	Section B: Section B Expense Allowances for each Accounting Period shall equal zero.
	(c)	The Section A Expense Allowances and the Section B Expense Allowances for each Accounting Period shall hereinafter be referred to collectively as the "Expense Allowances". The Expense Allowances for each Accounting Period shall be due and payable from the Reinsurer to the Company as part of the Total Settlement for that Accounting Period in accordance with Section 9.05.
	(d)	All direct or allocable expenses or taxes are included in the Expense Allowances.
ARTICLE V: COINSURANCE RESERVES
5.01 -	Coinsurance Reserves: The Coinsurance Reserves at the end of each Accounting Period shall equal six and 88/100 percent (6.88%) of the statutory reserves held for the Subject Business as of the end of that Accounting Period.
ARTICLE VI: LOSS CARRY FORWARD BALANCE
6.01 -	Loss Carry Forward Balance: The Loss Carry Forward ("LCF") on the Effective Date shall be equal to zero (0). The LCF at December 31, 2002 shall be an amount equal to the Cover A Coinsured Reserves on that date, as set forth on Schedule D. The LCF for each Accounting Period thereafter shall be the Target LCF or the Alternative LCF, as applicable, determined with reference to Schedule C1 and C2.
6.02 -	Target Risk Charge on LCF: If Company is not, and was not, in violation of one or more of the Financial Covenants at any time during that Accounting Period or any prior Accounting Periods, then the Target Risk Charge on the LCF at each Settlement Date shall equal (a) the Target Risk Charge Rate on that Settlement Date, multiplied by (b) the LCF on the prior Settlement Date.
6.03 -	Target Risk Charge Rate: The Target Risk Charge Rate at each Settlement Date shall equal (a) four and one-half percent (4.5%), multiplied by (b) the ratio of the number of days during that Accounting Period to three-hundred-sixty (360) days.
6.04 -	Alternative Target Risk Charge on Alternative LCF: If Company is or was in violation of one or more of the Financial Covenants at any time during that Accounting Period or any prior Accounting Periods, then the Alternative Target Risk Charge on the Alternative LCF at each Settlement Date shall equal (a) the Alternative Target Risk Charge Rate on that Settlement Date, multiplied by (b) the LCF on the prior Settlement Date.

6.05 -	Alternative Target Risk Charge Rate: The Alternative Target Risk Charge Rate at each Settlement Date shall equal (a) five and one-half percent (5.5%), multiplied by (b) the ratio of the number of days during that Accounting Period to three-hundred-sixty (360) days.
ARTICLE VII: NET CASH SETTLEMENT
7.01 -	Net Cash Settlement: The Net Cash Settlement for each Accounting Period shall be calculated on or before the Settlement Date for such Accounting Period in accordance with the illustration set forth in Schedule D attached hereto. If the Net Cash Settlement for an Accounting Period is greater than zero (0) and the Company is not, and was not, in violation of one or more of the Financial Covenants at any time during that Accounting Period or any prior Accounting Periods, an Experience Refund equal to (i) the statutory profits on the Subject Business for the Accounting Period less (ii) the difference between (a) the Target LCF on the last day of the immediately preceding Accounting Period and (b) the Target LCF on the last day of the current Accounting Period less (iii) the Funds Brought Forward Balance, shall be paid by the Reinsurer to the Company as part of the Total Settlement for that Accounting Period in accordance with Section 9.05. If the Net Cash Settlement for an Accounting Period is greater than zero (0) and the Company is or was in violation of one or more of the Financial Covenants at any time during that Accounting Period or any prior Accounting Periods, an Experience Refund equal to (i) the statutory profits on the Subject Business for the Accounting Period less (ii) the difference between (a) the Alternative Target LCF on the last day of the immediately preceding Accounting Period and (b) the Alternative Target LCF on the last day of the current Accounting Period less (iii) the Funds Brought Forward Balance, shall be paid by the Reinsurer to the Company as part of the Total Settlement for that Accounting Period in accordance with Section 9.05. If the Net Cash Settlement for an Accounting Period is less than zero (0), the absolute value of such Net Cash Settlement shall be added to the Funds Brought Forward Balance. The Funds Brought Forward Balance shall accrue with interest at a rate consistent with the interest rate of the Assets underlying the Subject Business and the Risk Charges set forth in Article VI.
	At the sole option of the Reinsurer, the Experience Refund may be recalculated at the end of any Accounting Period to include Total Settlements for all Accounting Periods in a calendar year. Upon any such recalculation of the Experience Refund, the Total Settlement will be recalculated accordingly and the parties agree to immediately pay each other amounts due based upon such recalculation.
	To eliminate any doubt regarding the calculation of the Experience Refund, the parties may look to the Letter of Intent dated December 19, 2002, between them as evidence of the manner in which the Experience Refund is calculated and paid to the Company.
ARTICLE VIII: FINANCIAL COVENANTS
8.01 -	Non-Compliance with Financial Covenants: The Company shall notify the Reinsurer within five (5) Business Days of any failure by the Company to comply with one or more of the Financial Covenants
8.02 -	Financial Covenants: The Financial Covenants are:
	(a)	the Company shall maintain Risk Based Capital, as measured by the formula prescribed by the insurance department of the Company's state of domicile, of no less than one-hundred twenty-five percent (125%) of the Company Action Level;
	(b)	the Company shall maintain Total Surplus of no less than one-hundred-twenty-five-million dollars ($125,000,000);

	(c)	there shall be no Change of Control of the Company, where "Change of Control" is signaled by the requirement that the Company, or the parent of the Company, file such change with any insurance department or with the Securities Exchange Commission;
	(d)	there shall be no material change in the Company's underwriting guidelines from those in effect as of the Effective Date, unless the Company obtains the prior written approval of the Reinsurer to such change;
	(e)	there shall be no material change in the overall credit quality of the Company's investment portfolio from the Effective Date;
	(f)	the insurance financial strength rating of the Company as assigned by A.M. Best Company shall not be less than "B+";
	(g)	the Financial Leverage Ratio (as defined in Section 8.03) of the Company and its corporate parent combined shall not be greater than sixty percent (60%); and
	(h)	the Cash Coverage Ratio (as defined in Section 8.04) of the Company and its parent combined shall not be less than one-and-two-tenths (1.2).
8.03 -	Financial Leverage Ratio: The Financial Leverage Ratio at any time shall be determined as follows, with the result expressed as a percentage:
	(a)	the sum of (i) the principal amount of loans outstanding at American Equity Investment Life Holding Company (the "Holding Company"), and (ii) the principal amount of loans outstanding at American Equity Investment Service Company (the "Service Company"), excluding any such loans that may be included in (a)(i) herein;
	divided by
	(b)	the sum of (i) the Company's Total Capital and Surplus, (ii) the Company's Asset Valuation Reserve, and (iii) the Company's Interest Maintenance Reserve, where items (i), (ii) and (iii) are the respective amounts as reported on the Company's most recent certified statutory financial statements.
8.04 -	Cash Coverage Ratio: The Cash Coverage Ratio at any time shall equal:
	(a)	the sum of (i) amounts available to the Company at that time for dividends to stockholders in accordance with the statutes and regulations of the State of Iowa, (ii) any commissions paid by the Company to the Service Company during the current Accounting Period, (iii) investment income of the Holding Company, excluding income from investments in subsidiaries, during the current Accounting Period, (iv) cash operating expenses of the Holding Company during the current Accounting Period, and (v) restricted payments (dividends paid to shareholders) by the Holding Company during the current Accounting Period;
	divided by
	(b)	the sum of (i) interest on loans outstanding at the Holding Company, (ii) distribution by the Holding Company on trust preferreds, and (iii) twenty percent (20%) of the principal amounts of loans outstanding at the Holding Company and at the Service Company.

ARTICLE IX: REPORTS AND REMITTANCES
9.01 -		Company Reports: The Company shall provide to the Reinsurer, no less than three (3) Business Days prior to each Settlement Date, all information and data required by the Reinsurer to fulfill its obligations and rights under this Agreement and to satisfy its legal reporting requirements. A suggested format for such reporting is attached hereto as Schedule D. The Company shall also furnish to the Reinsurer, on a quarterly basis, a copy of its certified statutory financial statements at the time such statements are submitted by the Company to the regulatory authority in its state of domicile, and shall furnish the Reinsurer with a statement at the end of each Accounting Period that demonstrates the Company's compliance with the Financial Covenants.
9.02 -		Accounting Period: Accounting Period shall mean each calendar quarter during the Term of this Agreement. In the event the Recapture Date occurs at any time other than at the end of a calendar quarter, the last Accounting Period shall be the period from the beginning of that calendar quarter to the Recapture Date, both dates inclusive.
9.03 -		Settlement Dates: The Settlement Date for each Accounting Period shall be the fifteenth (15^th) Business Day after the end of that Accounting Period.
9.04 -		Business Day: Business Day shall mean any day other than a Saturday, a Sunday, or a day on which commercial banks in, the State of Florida or the State of Iowa are authorized by law or executive order to close.
9.05 -		Total Settlement: The Total Settlement for each Accounting Period shall be calculated in accordance with Schedule D. If the Total Settlement for an Accounting Period is greater than zero, then such Total Settlement shall be due and payable by the Reinsurer to the Company on the Settlement Date for that Accounting Period. If the Total Settlement is less than zero, then the absolute value of such Total Settlement shall be due and payable by the Company to the Reinsurer on the Settlement Date for that Accounting Period.
ARTICLE X: NET RETAINED LINES
10.01 -		Application of Other Reinsurance Proceeds: This Agreement applies only to that portion of insurance or reinsurance which, after the application of all reinsurance other than the reinsurance hereunder, the Company retains net for its own account. In calculating the amount of loss hereunder for which the Company shall be reimbursed, only the loss with respect to such retained portion shall be included.
10.02 -		Collection of Other Reinsurance Proceeds: The amount of the Reinsurer's liability hereunder shall not be increased by reason of the Company's inability to collect from any other reinsurers, whether specific or general, any amounts which may have become due from them, whether such inability arises from the insolvency of such other reinsurers, or otherwise.
10.03 -		Other Reinsurance: In order to provide that the Reinsurer's liability under this Agreement shall not be increased in any calendar year by a change in reinsurance ceded or recoverable by the Company, the reinsurance arrangements, including treaties, facultative certificates and interpretations with respect to obligations thereunder, which were in effect on November 1, 2002 are deemed to continue in effect for purposes of all computations hereunder.

ARTICLE XI: EXCLUSIONS
11.01 -		Extracontractual Damages: This Agreement does not cover extracontractual damages or extracontractual liability resulting from fraud, oppression, bad faith, strict liability, or negligent, reckless or intentional wrongs, or otherwise, on the part of the Company or its directors, officers, employees and agents. The following types of damages are examples of damages excluded under this Agreement for the conduct described above: actual damages, damages for emotional distress, punitive or exemplary damages and attorneys fees.
11.02 -		Insolvency Funds: The Reinsurer shall not be obligated to pay to the Company any share of any liability of the Company arising, by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund or from reimbursement of any person for any such liability. "Insolvency Fund" includes any guaranty or insolvency fund, plan, pool, association, or other arrangement howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by any person or part of all of any claim, debt, charge, fee or other obligation of any insurer, or its successors or assigns which has been declared to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.
11.03 -		Dividends: The Reinsurer shall not participate in the determination of, nor reimburse the Company for, any policyholder or other dividends paid by the Company.
ARTICLE XII: INSOLVENCY
12.01 -		Reinsurer's Obligation: In the event of the insolvency of the Company, the reinsurance afforded by this Agreement shall be payable by the Reinsurer on the basis of the liability of the Company under the Subject Business, without diminution because of such insolvency, directly to the Company or its liquidator, receiver, conservator, or statutory successor.
12.02 -		Reinsurer's Notice and Defense of Claims: The Reinsurer shall be given written notice of the pendency of each claim or loss which may involve the reinsurance afforded by this Agreement within a reasonable time after such claim or loss is filed in the insolvency proceedings. The Reinsurer shall have the right to investigate each such claim or loss and interpose at its own expense, in the proceeding where the claim or loss is to be adjudicated, any defense which it may deem available to the Company or its liquidator, receiver, conservator, or statutory successor. If more than one reinsurer is involved, such reinsurers may designate one reinsurer to act for all.
12.03 -		Defense Expense: The expense thus incurred by the Reinsurer shall be chargeable, subject to court approval, against the insolvent Company as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.
12.04 -		Offset: Any debts or credits, liquidated or unliquidated, in favor of or against either party on the date of the receivership or liquidation order (except where the obligation was purchased by or transferred to be used as an offset) are deemed mutual debts or credits and shall be set off with the balance only to be allowed or paid. Although such claim on the part of either party may be unliquidated or undetermined in amount on the date of the entry of the receivership or liquidation order, such claim will be regarded as being in existence as of such date and any credits or claims then in existence and held by the other party may be offset against it.

12.05 -		Rights of Parties: Nothing hereinabove set forth in this Article shall in any way change the relationship or status of the parties hereto, nor enlarge the obligations of any party to any other except as specifically hereinabove provided, to wit, to pay the statutory successor on the basis of the amount of liability determined in the liquidation or receivership proceeding, rather than on the basis of the actual amount of loss (dividends) paid by the liquidator, receiver, conservator, or statutory successor to allowed claimants. Nor, except as hereinabove specifically provided, shall anything in this Article in any manner create any obligation or establish any right against the Reinsurer in favor of any third parties or any other persons not parties to this Agreement.
ARTICLE XIII: ARBITRATION
13.01 -		Resolution of Disputes: As a condition precedent to any right arising under this Agreement, any dispute between the Company and the Reinsurer arising out of the provisions of this Agreement, or concerning its interpretation or validity, whether arising before or after termination of this Agreement, shall be submitted to arbitration in the manner set forth in this Article. Either party may initiate arbitration of any dispute arising out of the provisions of this Agreement by giving written notice to the other party, by registered or certified mail, return receipt requested, of its intention to arbitrate and of its appointment of an arbitrator in accordance with Section 13.03.
13.02 -		Composition of Panel: Unless the parties agree upon a single arbitrator within fifteen (15) days after the receipt of a notice of intention to arbitrate, all disputes shall be submitted to an arbitration panel composed of two arbitrators and an umpire, chosen in accordance with Section 13.03 and Section 13.04.
13.03 -		Appointment of Arbitrators: The members of the arbitration panel shall be chosen from disinterested persons knowledgeable in the life insurance and life reinsurance business. The party requesting arbitration (hereinafter referred to as the "claimant") shall appoint an arbitrator and give written notice thereof, by registered or certified mail, return receipt requested, to the other party (hereinafter referred to as the "respondent") together with its notice of intention to arbitrate. Unless a single arbitrator is agreed upon within fifteen (15) days after the receipt of the notice of intention to arbitrate, the respondent shall, within thirty (30) days after receiving such notice, also appoint an arbitrator and notify the claimant thereof in a like manner. Before instituting a hearing, the two arbitrators so appointed shall choose an umpire. If, within twenty (20) days after they are both appointed, the arbitrators fail to agree upon the appointment of an umpire, the umpire shall be appointed by the executive director of the American Council of Life Insurers.
13.04 -		Failure of Party to Appoint Arbitrator: If the respondent fails to appoint an arbitrator within thirty (30) days after receiving a notice of intention to arbitrate, such arbitrator shall be appointed by the executive director of the American Council of Life Insurers, and shall then, together with the arbitrator appointed by the claimant, choose an umpire as provided in Section 13.03.
13.05 -		Choice of Law and Forum: Any arbitration instituted pursuant to this Article shall be held in Orlando, Florida, or in a location to be mutually agreed upon by the Company and the Reinsurer and the laws of the State of Iowa, without regard to its conflict of laws rules, shall govern the interpretation and application of this Agreement.
13.06 -		Submission of Dispute to Panel: Unless otherwise extended by the arbitration panel, or agreed to by the parties, each party shall submit its case to the panel within thirty (30) days after the selection of an umpire.

13.07 -		Procedure Governing Arbitration: All proceedings before the panel shall be informal and the panel shall not be bound by the formal rules of evidence. The panel shall have the power to fix all procedural rules relating to the arbitration proceeding. In reaching any decision, the panel shall give due consideration to the customs and usage of the insurance and reinsurance business.
13.08 -		Arbitration Award: The arbitration panel shall render its decision within sixty (60) days after termination of the proceeding, which decision shall be in writing, stating the reasons therefor. The decision of the majority of the panel shall be final and binding on the parties to the proceeding.
13.09 -		Cost of Arbitration: Unless otherwise allocated by the panel, each party shall bear the expense of its own arbitrator and its own witnesses and shall jointly and equally bear with the other parties the expense of the umpire and the arbitration.
13.10 -		Limit of Jurisdiction: The arbitration panel does not have the jurisdiction to authorize any punitive damage awards between the parties.
ARTICLE XIV: AGREEMENT, AMENDMENTS AND MERGER
14.01 -		Agreement: This Agreement states the agreement originally made between the Company and the Reinsurer effective November1, 2002 as evidenced by the Letter of Intent dated December 19, 2002. This Agreement supersedes that Letter of Intent as the statement of the terms and conditions which the Company and the Reinsurer have agreed shall govern the obligations originally undertaken in the Letter of Intent, except that the Letter of Intent shall be considered as evidence of the parties intent as to the meaning or application of any terms and conditions set forth herein.
14.02 -		Amendments: This Agreement may be amended only by mutual consent of the parties expressed in a written addendum executed by the parties with the same formalities as this Agreement, and such addendum shall be deemed to be an integral part of this Agreement and binding on the parties hereto.
14.03 -		Merger Clause: The parties hereto acknowledge that they have read this Agreement, understand it, and agree to be bound by its terms and conditions. Further, the parties hereto agree that this Agreement is the complete and exclusive statement of the Agreement between the parties, superseding all proposals or prior agreements, oral or written, and all other communications between the parties relating to the subject matter hereof.
ARTICLE XV: MISCELLANEOUS
15.01 -		Access to Records: The Reinsurer shall have the right to examine, at any reasonable time, all papers, books, accounts, documents and other records of the Company relating to the Subject Business. Upon request, the Company shall supply the Reinsurer, at the Reinsurer's expense, with copies of the whole or any part of such papers, books, accounts, documents and other records relating to the Subject Business. The Reinsurer's right of inspection under this Section 15.01 shall continue to exist after termination of this Agreement as long as one of the parties hereto has a claim against the other arising from this Agreement.
15.02 -		Counterparts: This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
15.03 -		Currency: All payments hereunder shall be made in United States dollars. All monetary amounts herein are in United States dollars. All reports and accounts hereunder shall be rendered in United States dollars.

15.04 -		Disclosures and Approvals: The Company represents and warrants, with respect to this Agreement and the transactions hereunder and with respect to any insurance or reinsurance written or assumed by the Company which is covered by this Agreement and all transactions thereunder, that all disclosures and approvals which are necessary or appropriate under any law or regulation have been made or obtained, or will be made or obtained in a timely manner.
15.05 -		Errors and Omissions: Inadvertent errors and omissions of any nature made by either party shall neither increase nor reduce the liability of either party from what that liability would have been had no such error or omission taken place. Upon discovery, the party committing an error or omission shall correct such error or supply such omission retroactively to the time such error or omission occurred, and advise the other party thereof as soon as possible.
15.06 -		Parties to this Agreement: This Agreement is a reinsurance agreement solely between the Company and the Reinsurer, and performance of the obligations of each party under this Agreement will be rendered solely to the other party. In no instance will any party other than the Company and the Reinsurer have any rights under this Agreement, and the Company will be and shall remain the only party hereunder that is liable to any contract holder or beneficiary of any Subject Business contract.
		This Agreement shall be binding upon all successors, assignees and transferees of the parties to this Agreement, provided, however, that neither this Agreement nor any rights or obligations under this Agreement may be assigned or transferred by either party without the prior written consent of the other party.
15.09 -		Reliance on Information Supplied by the Company: The Company acknowledges that, at the Reinsurer's request, it has provided the Reinsurer, prior to execution of this Agreement by the parties, with the information described in Schedule D attached hereto and incorporated herein (hereinafter, the "Company Information"). The Company represents that any assumptions the Company made in preparing the Company Information were based upon informed judgment and are consistent with sound actuarial principles. The Company represents that all factual information contained in the Company Information was, as of the date provided, complete and accurate in all material respects to the best of the Company's knowledge and belief. The Reinsurer has relied on Company Information and the foregoing representations in entering into this Agreement.
15.10		Right of Offset: Both the Company and the Reinsurer shall have, and may exercise at any time, the right to offset any balance or balances due the other. Such offset may include balances due under this Agreement, regardless of whether such balances are in respect of premiums, or losses or otherwise, and regardless of the capacity of any party, whether as reinsurer or reinsured or otherwise, under the various agreements involved.
15.11 -		Taxes: The Company shall be liable for all taxes, except income and profit taxes of the Reinsurer, on amounts paid to the Reinsurer under the terms of this Agreement, and shall indemnify and hold the Reinsurer harmless for any taxes which the Reinsurer may become obligated to pay on the Company's behalf.
[SIGNATURES ON FOLLOWING PAGE]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives,

In West Des Moines, Iowa, this 26^TH day of March, 2003

AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY

By:			By:
Name:			Name:
Title:			Title:

And in Orlando, Florida this 26^TH day of March, 2003

HANNOVER LIFE REASSURANCE COMPANY OF AMERICA

By:			By:
Name:			Name:
Title:			Title:

Schedule A - Contract Forms Covered Under Agreement

Section A Covered Forms

Bravo	XXXX-0
XXXX-0x0	XXXX
XXXX-0	XXXX-0
XXXX-0	sPDA-1
FPDA-2	SPDA-2
XXXX-0Xxxx	Xxxxx-0
XXXX-0	XXXX-0
XXXX-0
Section B Covered Forms
Bravo	Index-2000
FPDA-2+7	Index-2001
XXXX-0	Xxxxx-0000
XXXX-0	Index-13
FPDA-2	Index-15
FPDA-2Plus	Index-17
FPDA-3	Index-18
FPDA-4	Index-19
FPDA-5	Index-22
GFIR	Index-23
SPDA-1	Index-24
SPDA-1	Index-25
SPDA-2	Index-5
Super-7	Index-8
SPDA-6

Par		Cusip	Issuer	Coupon(%)	Maturity	Rating	Amort Cost		Book Value		Market Price		2/28/03 Market Value		Unrealized G/L (Mkt - Book)			Yield At Cost
$	4,000,000.00	84258RAC	SOUTHERN CO CAP TRUST	8.140	2/15/27	BAA1/BBB+	$	105.60	$	4,224,090.00	$	110.27	$	4,410,627.26	$	186,537.26		7.384	%
$	8,000,000.00	46623MAA	JPM CAP TRUST II *	7.950	2/1/27	A2/A-	$	105.14	$	8,410,952.00	$	109.39	$	8,751,138.00	$	340,186.00		7.304	%
$	8,000,000.00	428040BQ	HERTZ CORP	7.400	3/1/11	BAA2/BBB	$	99.70	$	7,976,189.00	$	97.94	$	7,835,360.00	$	(140,829.00	)	7.448	%
$	3,000,000.00	69331VAA	PECO ENERGY CAP TRUST III	7.380	4/6/28	BAA1/BBB	$	99.26	$	2,977,745.00	$	102.18	$	3,065,400.00	$	87,655.00		7.444	%
$	6,000,000.00	3133MWRB	FEDERAL HOME LN BANK	5.830	3/25/23	AGY	$	99.90	$	5,994,000.00	$	99.90	$	5,994,000.00	$	—		5.861	%
									$	29,582,976.00			$	30,056,525.26				7.076	%

SCHEDULE B—
RATES BY AGE (NEAREST BIRTHDAY)

AGE	RATE	AGE	RATE	AGE	RATE
0	0.026198	35	0.006799	69	0.085706
1	0.002021	36	0.007140	70	0.093004
2	0.001444	37	0.007455	71	0.100774
3	0.001050	38	0.007744	72	0.109174
4	0.000866	39	0.007954	73	0.118204
5	0.000761	40	0.008190	74	0.127995
6	0.000709	41	0.008505	75	0.138600
7	0.000656	42	0.008951	76	0.150203
8	0.000578	43	0.009555	77	0.162934
9	0.000499	44	0.010290	78	0.176111
10	0.000394	45	0.011130	79	0.192386
11	0.000420	46	0.012049	80	0.209685
12	0.000630	47	0.013020	81	0.229110
13	0.001103	48	0.013965	82	0.251108
14	0.001706	49	0.014989	83	0.303949
15	0.002389	50	0.016091	84	0.327154
16	0.003045	51	0.017351	85	0.352249
17	0.003544	52	0.018926	86	0.380074
18	0.003859	53	0.020843	87	0.408293
19	0.003990	54	0.023048	88	0.436223
20	0.004095	55	0.025515	89	0.464625
21	0.004279	56	0.028114	90	0.494760
22	0.004384	57	0.030923	91	0.528281
23	0.004436	58	0.033941	92	0.565478
24	0.004541	59	0.037223	93	0.605850
25	0.004568	60	0.040714	94	0.646826
26	0.004620	61	0.049954	95	0.686411
27	0.004725	62	0.048431	96	0.720248
28	0.004883	63	0.052658	97	0.752168
29	0.005119	64	0.057199	98	0.782171
30	0.005381	65	0.061976	99	0.810259
31	0.005618	66	0.067121	100	0.836456
32	0.005854	67	0.072739	101	0.860790
33	0.006143	68	0.078934	102	0.875000
34	0.006431

Section A Cover: Coins.
Prems					34.09		—		—		—		—		—
Inv. Income					—		2.10		1.76		1.73		1.71		1.68		1.66
Benefits		% coins share			—		3.49		5.69		5.80		5.92		6.04		6.17
Allowances		=premium (FY only) + renewal maintenance			34.09		0.03		0.03		0.03		0.03		0.02		0.02
Incr in Res.					30.00		(4.90	)	(0.34	)	(0.35	)	(0.36	)	(0.36	)	(0.37	)
Section A Gain					(30.00	)	3.48		(3.62	)	(3.74	)	(3.88	)	(4.02	)	(4.17	)
					—		—		—		—		—		—		—
	Reserve				30.00		25.10		24.76		24.41		24.05		23.69		23.32

Section B Cover: YRT
Fund Value					1,126.10		1,143.66		1,125.56		1,107.76		1,090.23		1,072.98		1,056.01
Cash Value					1,073.40		1,006.42		1,001.75		996.98		992.11		987.15		982.09
Net Amt at Risk		Average			79.16		164.11		150.26		136.81		123.74		111.05		98.74
Mort Rates		multilpe of 2000 basic	100.00	%	—		0.02		0.02		0.02		0.02		0.02		0.03
Mort Cost		NAR x mort rates			—		1.20		2.78		2.84		2.88		2.89		2.87
YRT premium					—		—		—		—		—		—
					—		—		—		YRT Policy fee		—		75.00		—
					—		—		—		Avg size policy		—		50.00		—
Sched B YRT Premium /K for initial age =		YRT rates per			290.96		315.74		342.83		372.02		403.10		436.70		472.82
YRT Premium		Sched B + 75/pol			—		39.84		55.21		54.62		53.63		52.29		50.53
Mort Cost		per above			—		1.20		2.78		2.84		2.88		2.89		2.87
Section B Gain		Net			—		38.64		52.43		51.77		50.75		49.40		47.66
Combined Covers
Experience Refund
NRG - Net Reins Gain		Coins plus YRT			(30.00	)	42.12		48.81		48.03		46.87		45.38		43.49
Earned Interest on LCF							2.10		1.73		1.34		0.93		0.48		—
Change in LCF							5.22		5.58		5.97		6.39		6.84		—
LCF Adjustment							7.32		7.32		7.32		7.32		7.32		—
Funds Brought Forward Balance							—		—		—		—		—		—
Loss Carry Forward Balance (LCF)					30.00		24.78		19.20		13.23		6.84		0.00		0.00
DP—Distributable Profits=NRG-RC-LCFA							33.45		40.38		39.85		38.96		37.76		43.49
PS—Profit Share percentage		100% until LCF = 0; 50% thereafter					100%		100%		100%		100%		100%		50%
ER—Experience Refund=PS*DP					—		33.45		40.38		39.85		38.96		37.76		21.75

Settlements
Net due reinsurer prior to funds withheld adjustment			—		1.67		6.33		6.10		5.85		5.58		19.72
Funds Withheld Adjustment					—		—		—		—		—		—
	Beginning funds withheld (by cedent)		—		—		0.32		5.56		11.18		17.21		23.69
Interest on funds withheld @		=block earned rate	—		—		0.02		0.39		0.78		1.20		1.66
	Change in funds withheld		—		(0.32	)	(5.22	)	(5.23	)	(5.25	)	(5.27	)	2.03
	Ending funds withheld	=Reserve—LCF	—		0.32		5.56		11.18		17.21		23.69		23.32
Net cash settlement (due reins)			—		1.35		1.12		0.86		0.60		0.31		—

Notes: Recapture allowed at any time with payment of LCF to reinsurer.			30.00		28.33		22.00		15.90		10.05		4.48		(15.24	)
Premium Ceded			34.09		39.84		55.21		54.62		53.63		52.29		50.53
Benefits Ceded			—		(3.49	)	(5.69	)	(5.80	)	(5.92	)	(6.04	)	(6.17	)
Allowances			(34.09	)	(1.23	)	(2.81	)	(2.87	)	(2.91	)	(2.92	)	(2.89	)
Experience Refund			—		(33.45	)	(40.38	)	(39.85	)	(38.96	)	(37.76	)	(21.75	)
Net Due to Reinsurer			—		1.67		6.33		6.10		5.85		5.58		19.72
Cash Settlement			—		1.35		1.12		0.86		0.60		0.31		—
			—		—		—		—		—		—		—
Income Statement			—		—		—		—		—		—		—
Increase In Reserves			30.00		(4.90	)	(0.34	)	(0.35	)	(0.36	)	(0.36	)	(0.37	)
Investment Income Due to Reinsurer			—		(2.10	)	(1.76	)	(1.73	)	(1.71	)	(1.68	)	(1.66	)
Change in Ending Funds Withheld			—		(0.32	)	(5.20	)	(4.85	)	(4.47	)	(4.06	)	(18.06	)
Interest on Funds Withheld			—		—		(0.02	)	(0.39	)	(0.78	)	(1.20	)	(1.66	)
Risk Charge			—		(1.35	)	(1.12	)	(0.86	)	(0.60	)	(0.31	)	—
Total Impact to American Equity			30.00		(8.67	)	(8.43	)	(8.18	)	(7.91	)	(7.62	)	(21.75	)