The CEO of American Equity Investment says the company chose ‘pricing discipline’ rather than the hunt for market share to explain the carrier’s lower fixed-index annuity sales in a hot quarter for investors. products.
“We chose price discipline over chasing the market as interest rates fluctuated,” Anant Bhalla said during the company’s third-quarter earnings call on Tuesday. “We continue to see competitors raising rates on products with a cost of money potentially well over 4%, which already suggests a sustained level of higher interest rates in the future.”
“We chose price discipline over chasing the market as interest rates fluctuated.” Anant Bhalla, CEO of American Equity
American Equity saw total business accumulation sales decline 21% from the second quarter, due to commodity-based competition in S&P 500-based strategies, Bhalla said.
The carrier saw a significant drop in its AIF, its core products, shrinking its combined operations by 6%, from $776 million in the second quarter, to $730 million in the third, a decrease of 20% compared to to the sales of the quarter of the previous year. of $915 million.
Bhalla said the company has eased off to better position itself in the future, but added that the company will offer better rates this month.
“In November, we are increasing our accumulation product option budgets to reflect the yields of new monetary assets which can be maintained around 6% or more and will therefore be more price competitive,” Bhalla said.
He also said the company expects to break into the highly competitive indexed registered annuity market soon.
“We will likely enter the registered indexed annuity or RILA products market over the next 18 months as we implement a new policy administration system for new business and further improve our go-to-market approaches” , Bhalla said.
Surprise resignation from BAM Re
During the Q&A portion of the call, analysts asked about Sachin Shah’s surprise resignation from American Equity Investment’s board. Shah represented Brookfield Asset Management Re (BAM Re), whose American Equity investment amounts to 16% of the carrier.
Shah, CIO of BAM Re, said in his resignation letter, effective today, that the reinsurer lost faith in American Equity’s strategic direction and demanded the sale of all 9,106,042 shares of BAM Re.
The letter reads as follows:
“Letter to Council:
“I hereby tender my resignation as a member of the Board of Directors (the “Board”) of American Equity Investment Life Holding Company (the “Company”), effective immediately.
“It is clear, based on recent events, that there has been a fundamental shift in the strategic direction of the company, and this shift, in my view, represents a significant departure from the AEL 2.0 strategy. As previously announced, neither I nor Brookfield Reinsurance can support this change in strategy as being in the best interests of the Company, its policyholders or its shareholders.
“At this time, Brookfield Reinsurance will not exercise its rights under the Investment Agreement to appoint a replacement director to the board.”
The analysts’ questions surprised American Equity executives. Bhalla said he was unaware of the letter, but he discussed other reassurance relationships and assured analysts the company was still on track with its AE 2.0 strategy, a growth plan which the carrier unveiled in 2020.
“There is no fundamental change in our AEL 2.0 strategy,” Bhalla said. “Our strategy is about our flywheel.”
American Equity did not respond to a request for additional comment.
Steven A. Morelli is editor for InsuranceNewsNet. He has over 25 years of experience as a journalist and editor of newspapers and magazines. He was also vice-president of communications for an association of insurance agents. Steve can be reached at [email protected]
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