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Annuity Seller Launches IPO, Courts Agents

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NU Online News Service, Dec. 8, 2003, 5:39 p.m. EST – An 8-year-old Midwestern life insurance company that emphasizes strong relationships with agents is raising $168 million through an initial public offering.[@@]

American Equity Investment Life Holding Company, Des Moines, Iowa, is selling 18.7 million shares to the public at a price of $9 each.

Merrill Lynch & Company Inc., New York, and the other investment banks that are managing the offering have an option to buy another 2.8 million shares.

David Noble and other former executives of The Statesman Group Inc., Des Moines, Iowa, formed American Equity in late 1995 by buying two large blocks of business from Statesman. Later, Noble’s team acquired Century Life Insurance Company, Waverly, Iowa, and started a subsidiary domiciled in New York.

The company now has licenses to sell its products in 46 states and the District of Columbia.

The company has more than $2 billion of life insurance business on its books and it still sells life insurance, but it has focused on selling variable annuities, fixed annuities and equity-indexed annuities to U.S. residents who are saving for retirement.

The company boasts of having links to about 70 national marketing organizations and, through the marketing organizations, 41,000 independent agents.

“In our recruitment efforts,” the company says in its IPO prospectus, “we emphasize that agents have direct access to our executive officers.”

Offering agents direct access to executive officers helps give American Equity an edge over bigger insurers and foreign-owned insurers, the company says.

The company also points out in the IPO prospectus that it was the first company to introduce an index annuity that let policyholders earn returns linked to the Dow Jones Index.

American Equity also introduced one of the first annuities that let policyholders choose between a traditional fixed rate of return or a rate based on a formula that included bond indices as well as stock indices, the company says.

FBL Financial Group Inc., West Des Moines, helped American Equity get into the variable annuity market by agreeing in 1997 to help American Equity develop, market and administer VA products. American Equity shares in 30% of the risks, costs and operating results for VA products sold through the FBL arrangement.

FBL Financial, the parent of Farm Bureau Life Insurance Company, started out owning a 32% stake in American Equity before the IPO took place.

FBL Financial bought 550,000 additional American Equity shares through the IPO, but it says it is letting its ownership interest shrink in percentage terms because of internal and regulatory guidelines that limit the amount of capital it can concentrate in a single investment.