American Equity Investment Life Holding Co. had to lower their interest rates recently for the first time since 2007. Low interest rates in this volatile financial market have been really hurting the company’s spread, so they lowered new annuity rates by .4 to .5% in October. The difference between the interest they were paying out and that which they were receiving was too high not to make a change. Annuities renewing after November 14 will also get interest rate reductions, according to the Des Moines Register’s “Chaos in financial markets aids American Equity, yet it will cut rates,” by Adam Belz.
But American Equity did see increasing sales of annuities, especially the fixed equity indexed annuities in which they specialize. Sales of annuities increased every month last quarter, with a high in September of $462 million. Their third quarter operating profits increased 50% from 2010, to $41.5 million. Consumers were buying annuities in large numbers because of their safety and security in a volatile market. Despite increased operating profits, American Equity had an overall loss of $13.1 million in the third quarter, prompting their decrease in annuity rates.
Written by Rachel Summit