American Equity CEO Sees Annuity Competition Moderating

The average yield on invested assets climbed to 4.48%, from 4.15%.

Securities analysts on the call based their questions on the operating results, not the net results.

The Sales

American Equity’s sales of annuities increased to $1.4 billion, from $902 million in the year-earlier quarter, and sales of non-variable indexed annuities increased to $964 million, from $883 million.

The Competitive Environment

Bhalla suggested in February that he was already seeing some competitors lower crediting rates.

Last week, Bhalla observed that one sign of market rationality has been a reduction in non-variable indexed annuities’ cap rates, or the maximum rates that contract holders will pay when the investment indexes tied to the annuities perform very well. “I think the 12% cap rates are gone, which is nice, and we’re in the 10% to 11% range now,” he said. “There are one or two very irrational competitors with 15% cap rates, which I don’t understand, and I will not try to understand.”

American Equity is attracting high-quality distributors with systems that help agents and advisors write business quickly,  Bhalla added.

“And distribution who wants to go to the marginal players, God bless them,” Bhalla said. “We focus on the ones who want to be with us.”

(Photo: Lucky-photographe/Shutterstock)