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May 15, 2023 at 10:32 AM
What You Need to Know
- A few major competitors are offering 12% caps.
- Some are still offering 15% caps.
- American Equity CEO Anant Bhalla contends that the strategies of the top players and some new players are diverging.
The head of a midsize annuity issuer says the level of competition is becoming more rational.
Anant Bhalla, the CEO of American Equity Investment Life Holding Co., told securities analysts last week that he has seen some competitors changing contract terms in recent weeks. “There is this pocket of irrationality, but more rationality,” Bhalla said. “I think the top five or six players drive everything, and then there are some marginal new players that we’re very cautious about.”
What It Means
The spreads between the rates offered by the most generous non-variable annuities and the least generous might be widening.
You and your clients may want to review the reasoning behind issuers’ crediting rates and other contract terms.
The Earnings
American Equity held a conference call for securities analysts to go over first-quarter results.
New U.S. generally accepted accounting principles (GAAP) rules require insurers to put an estimate of the change in the value of future life insurance and annuity benefits in current earnings.
Because of the GAAP change, American Equity reported a $156 million net loss for the latest quarter on $662 million in revenue, compared with $679 million in net income on $148 million in revenue for the first quarter of 2022.
Non-GAAP operating income, which excludes the effects of the new mark-to-market rules for benefits obligations, increased to $124 million, from $107 million.
