American Equity Investment Life Holding Profile
American Equity Investment Life Holding Company engages in the development and sale of fixed index and fixed rate annuity products.
The company issues fixed annuity products through its wholly-owned life insurance subsidiaries, American Equity Investment Life Insurance Company (American Equity Life), American Equity Investment Life Insurance Company of New York (American Equity Life of New York) and Eagle Life Insurance Company (Eagle Life). The company has one business segment which represents its core business consist of the sale of fixed index and fixed rate annuities. The company is licensed to sell its products in 50 states and the District of Columbia. The company’s target market includes individuals, typically ages 40 or older, who are seeking to accumulate tax-deferred savings or create guaranteed lifetime income. The company operates solely in the insurance business.
Strategy
The company offers its customers simple fixed and fixed index annuity products, which it primarily sells through independent insurance agents in the independent marketing organization (IMO) distribution channel. The company has consistently been a leader in the IMO market.
The company will continue to implement an updated strategy, referred to as AEL 2.0, after having undertaken a thorough review of its business in 2020. AEL 2.0 is designed to capitalize on the scarcity value of the company’s annuity origination and couple it with an open architecture investment management platform for investing the annuity assets. The company’s approach to investment management is to partner with best in class investment management firms across a wide array of asset classes and capture part of the asset management value chain economics for its shareholders. This will enable the company to operate at the intersection of both asset management and insurance. The company’s updated strategy focuses on four key pillars: Go-to-Market, Investment Management, Capital Structure and Foundational Capabilities.
The Go-to-Market pillar focuses on how the company generates long-term client assets, referred to as policyholder funds under management, through annuity product sales. The company considers its marketing capabilities and franchise to be one of its core competitive strengths. American Equity Life has become one of the leading insurance companies in the IMO distribution channel over the company’s 25-year history and can tap into a core set of loyal independent producers to originate new annuity product sales. The company plans to increase its share of annuity product sales generated by IMOs and accelerate its expansion into bank, broker dealer and registered investment advisor distribution through its subsidiary, Eagle Life Insurance Company (Eagle Life). The company’s strategy is to improve sales execution and enhance producer loyalty with product solutions, focused marketing campaigns, distribution analytics to enhance both sales productivity and producer engagement and new client engagement models that complement traditional physical face-to-face interactions.
The company’s investment strategy is to supplement its core fixed income investment portfolio with opportunistic investments in alpha-producing specialty sub-sectors like middle market credit and sectors with contractually strong cash flows like real estate and infrastructure, including private equity assets. The company executes on this strategy by forming partnerships with certain asset managers that will provide access to specific asset sectors, resulting in a sustainable supply of quality private investments, in addition to traditional fixed income securities.
The Foundational Capabilities pillar focuses on upgrading the company’s operating platform to enhance the digital customer experience, create differentiation through data analytics to support the first three pillars, enhance core technology and align talent. During 2022, the company continued to advance its AEL 2.0 strategy as it executed against the key pillars. In its Foundational Capabilities pillar, the company continued to invest in enhancing its foundational capabilities by implementing new investment accounting and investment management systems. The company is in process of implementing a new general ledger system.
Products
Annuities offer the company’s policyholders a tax-deferred means of accumulating retirement savings, as well as a reliable source of income during the payout period.
Fixed Index Annuities
Fixed index annuities allow policyholders to earn index credits based on the performance of a particular index without the risk of loss of their account value. Most of these products allow policyholders to transfer funds once a year among several different crediting strategies, including one or more index based strategies and a traditional fixed rate strategy. Bonus products represented 63% of the company’s net annuity account values at December 31, 2022. The initial annuity deposit on these policies is increased at issuance by a specified premium bonus ranging from 5% to 10%.
Fixed Rate Annuities
Fixed rate deferred annuities include annual, multi-year rate guaranteed products (MYGAs) and single premium deferred annuities (SPDAs). The company’s annual reset fixed rate annuities have an annual interest rate (the crediting rate) that is guaranteed for the first policy year. After the first policy year, the company has the discretionary ability to change the crediting rate once annually to any rate at or above a guaranteed minimum rate. The company’s MYGAs and SPDAs are similar to its annual reset products except that the initial crediting rate on MYGAs is guaranteed for up to seven years before it may be changed at its discretion while the initial crediting rate on SPDAs is guaranteed for either three or five years.
The company also sells single premium immediate annuities (SPIAs). The company’s SPIAs provide a series of periodic payments for a fixed period of time or for life, according to the policyholder's choice at the time of issue. The amounts, frequency and length of time of the payments are fixed at the outset of the annuity contract. SPIAs are often purchased by persons at or near retirement age who desire a steady stream of payments over a future period of years.
Marketing/Distribution
The company markets its products through a variable cost distribution network, including independent agents through IMOs, broker/dealers, banks and registered investment advisors. The company emphasizes high quality service to its agents, distribution partners and policyholders along with the prompt payment of commissions to its agents and distribution partners.
The company’s independent agents and agencies range in profile from national sales organizations to personal producing general agents. A value proposition that it emphasizes with agents is they have direct access to the company’s senior leadership, giving it an edge over larger and foreign-owned competitors. The company also emphasizes its products, service and its focused fixed annuity expertise. The company also has favorable relationships with its IMOs, which have enabled it to efficiently sell through an expanded number of independent agents.
American Equity Life has relationships with 50 national marketing organizations, through which nearly 28,638 independent agents are under contract. We generally do not enter into exclusive arrangements with these marketing organizations.
Eagle Life's fixed index and fixed rate annuities are distributed pursuant to selling agreements with broker/dealers, banks and registered investment advisors. Eagle Life has 102 broker-dealer/firm selling agreements, through which nearly 12,050 representatives are appointed. Twenty-six of these agreements are with broker/dealers affiliated with banks. Relationships with certain of these firms are facilitated by third party wholesalers who promote Eagle Life and are compensated based upon the sales of the firms they have contracted with Eagle Life.
Regulation
The company and counterparties are subject to the Dodd-Frank Act (Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010) regulation of collateral posting, clearing, and reporting of over-the-counter derivatives transactions.
Regulations with a significant impact on the company’s operations include the New York Department of Financial Services cybersecurity requirements for financial services companies and the California Consumer Privacy Act.
The company provides products and services to certain employee benefit plans that are subject to the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code of 1986, as amended (the ‘Code’).
One of the company’s subsidiaries is registered with the Securities and Exchange Commission as a broker-dealer under the Securities Exchange Act of 1934, as amended (Exchange Act) and a member of, and subject to regulation by, FINRA.
History
American Equity Investment Life Holding Company was founded in 1995. The company was incorporated in the state of Iowa in 1995.
