Profile: American Equity Investment Life Holding Co (AEL.N)
American Equity Investment Life Holding Company, incorporated on December 15, 1995, is engaged in the development and sale of fixed index and fixed rate annuity products. The Company is a full service underwriter of fixed annuity and life insurance 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, and Eagle Life Insurance Company (Eagle Life). Its business consists primarily of the sale of fixed index and fixed rate annuities. The Company’s products include Fixed Index Annuities, Fixed Rate Annuities, Withdrawal Options-Fixed Index and Fixed Rate Annuities and Life Insurance.
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 principal. Approximately 95% of its fixed index annuity sales for the years ended December 31, 2011, were premium bonus products. The annuity contract value is equal to the sum of premiums paid, premium bonuses and interest credited (index credits), which is based upon an overall limit (or cap) or a percentage (the participation rate) of the annual appreciation (based in certain situations on monthly averages or monthly point-to-point calculations) in an index or benchmark. Caps generally range from 1% to 13.5% and participation rates generally range from 10% to 100%. In addition, some products have an asset fee ranging from 1.5% to 5%, which is deducted from annual interest to be credited. The minimum guaranteed contract values are equal to 87.5% of the premium collected plus interest credited at an annual rate ranging from 1.5% to 3.5%.
Fixed Rate Annuities
Fixed rate deferred annuities include annual reset and multi-year rate guaranteed products. Its annual reset fixed rate annuities have an annual interest rate (the crediting rate) that is guaranteed for the first policy year. The Company’s multi-year rate guaranteed annuities are similar to its annual reset products except that the initial crediting rate is guaranteed for up to a seven-year period before it may be changed at its discretion. The guaranteed rate on its fixed rate deferred annuities ranges from 1.5% to 4% and the initial guaranteed rate on its multi-year rate guaranteed policies ranges from 2.4% to 5.10%.
The Company also sells single premium immediate annuities (SPIAs). Its SPIAs are designed to 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. The implicit interest rate on SPIAs is based on market conditions when the policy is issued. The implicit interest rate on its outstanding SPIAs averaged 2.60% at December 31, 2011.
Withdrawal Options-Fixed Index and Fixed Rate Annuities
Policyholders are typically permitted penalty-free withdrawals up to 10% of the contract value in each year after the first year, subject to limitations. Withdrawals in excess of allowable penalty-free amounts are assessed a surrender charge during a penalty period which ranges from 5 to 17 years for fixed index annuities and 3 to 15 years for fixed rate annuities from the date the policy is issued. This surrender charge initially ranges from 4.7% to 20% for fixed index annuities and 8% to 25% for fixed rate annuities of the contract value and generally decreases by approximately one to two percentage points per year during the surrender charge period.
Life Insurance products include ordinary and term, universal life and other interest-sensitive life insurance products. It had approximately $2.5 billion of life insurance in force as of December 31, 2011. Premiums related to this business accounted for 1% of revenues for the years ended December 31, 2011.
The Company competes with Allianz Life Insurance Company of North America, Aviva USA, Great American Life Insurance Company, Midland National Life Insurance Company, North American Company for Life and Health Insurance and Security Benefit Life.
American Equity Investment Life Holding Co
6000 Westown Parkway
WEST DES MOINES IA 50266