American Equity: Fixed Index Annuities Are Gaining Market Share
March 6, 2014 by Best's News Service
ORLANDO, Fla. – Iowa-based American Equity Investment Life Holding Co. is seeing more acceptance among brokers and banks for selling fixed index annuities, its primary product, as the products gain market share among annuities.
Until now American Equity has sold its fixed index annuities through independent agents, but there’s potential to sell through brokers, dealers and banks, said John M. Matovina, president and chief executive officer of American Equity, during the Raymond James Financial Inc. Institutional Investors Conference in Orlando, Fla.
American Equity uses its subsidiary, Eagle Life Insurance Co., to distribute the product to agents and brokers.
In the meantime, the demographics of the United States are on the company’s side. “Everyone knows the population of America is aging, and that’s the market we sell to,” Matovina said. American Equity sells its fixed income annuities to 65-year-olds with an average fund value of just less than $75,000, he said.
It’s a fast-growing market. Although variable annuities have been the dominant annuity product, fixed index annuities are gaining market share, Matovina said.
American Equity has been a pioneer and leader in fixed index annuities, it said. For 13 of the past 14 years the company has been a top three provider.
Fixed index annuities offer an opportunity for lifetime income with a feature that allows policyholders to maintain access to their underlying cash value in cases of a financial emergency.
For policyholders who are uncomfortable with index-linked interest, they can move money back and forth once a year on their anniversary to a fixed rate strategy, Matovina said.
In the fourth quarter of 2013, American Equity’s net income rose 40.2% to nearly $51 million. For the full year, net income increased sharply to $253.3 million from $57.8 million in 2012 (Best’s News Service, Feb. 14, 2014).
Most of the company’s income comes from earning a spread on investments. During the fourth quarter, American Equity’s investment spread was 2.73%.
Subsidiaries of American Equity Investment Life Holding Co. have a current Best’s Financial Strength Ratings of A- (Excellent).
During afternoon trading March 5, shares of American Equity (NYSE: AEL) were $22.59, down 0.37% from the previous close.
(By Marie Suszynski, Best’s News Service correspondent)