Derivatives Push Up Profits At Indexed Products Seller

Although a slowdown in the indexed products market led to a drop in annuity sales at American Equity in 2006, operating revenue was up.

The gap between the yield American Equity paid annuity holders and the yield it earned on its own investments increased to 2.73% for 2006, from 2.48% for 2005, due in part to the expiration of annuities with 5-year minimum rate guarantees that were sold in 2001, back when rates were substantially higher than they are today.

American Equity also benefited from a substantial increase in the fair value of its derivatives holdings, to $124 million, from $3.9 million.