American National Group Inc. engages in the development and sale of fixed index and fixed rate annuity products.
The company issues fixed annuity products through its wholly-owned life insurance subsidiaries, American Equity Investment Life Insurance Company ('American Equity Life'), American Equity Investment Life Insurance Company of New York ('American Equity Life of New York') and Eagle Life Insurance Company ('Eagle Life'). The company has one business segment, which represents its core bu...
American National Group Inc. engages in the development and sale of fixed index and fixed rate annuity products.
The company issues fixed annuity products through its wholly-owned life insurance subsidiaries, American Equity Investment Life Insurance Company ('American Equity Life'), American Equity Investment Life Insurance Company of New York ('American Equity Life of New York') and Eagle Life Insurance Company ('Eagle Life'). The company has one business segment, which represents its core business consisted of the sale of fixed index and fixed rate annuities. The company is licensed to sell its products in 50 states and the District of Columbia.
Annuity Market
The company's target market includes individuals, typically ages 40 or older, who are seeking to accumulate tax-deferred savings or create guaranteed lifetime income.
Strategy
The company offers its customers simple fixed and fixed index annuity products, which the company primarily sells through independent insurance agents in the independent marketing organization ('IMO') distribution channel. The company has consistently been a leader in the IMO market. Additionally, the company has continued to expand its sales in the bank and broker dealer channel.
The company began to implement an updated strategy, referred to as AEL 2.0, after having undertaken a thorough review of the company's business in 2020. AEL 2.0 is designed to capitalize on the scarcity value of the company's annuity origination and couple it with an 'open architecture' investment management platform for investing the annuity assets. The company's approach to investment management is to partner with investment management firms across a wide array of asset classes and capture part of the asset management value chain economics for the company's shareholders. This enables the company to operate at the intersection of both asset management and insurance. The company's strategy focuses on various key pillars, such as Go-to-Market, Investment Management, and Foundational Capabilities.
The Go-to-Market pillar focuses on how the company generates long-term client assets, referred to as policyholder funds under management, through annuity product sales. American Equity Life is one of the leading insurance companies in the IMO distribution channel and can tap into a core set of loyal independent producers to originate new annuity product sales. The company is focused on growing its loyal producers with one million dollars or greater of annuity product sales each year and to otherwise build the company's partnerships with key IMOs. The company plans to increase its share of annuity product sales generated by IMOs and accelerate the company's expansion into bank, broker dealer and registered investment advisor distribution through the company's subsidiary, Eagle Life. The company's strategy is to improve sales execution and enhance producer loyalty with product solutions, focused marketing campaigns, distribution analytics to enhance both sales productivity and producer engagement and new client engagement models that complement traditional physical face-to-face interactions.
The Investment Management pillar is focused on generating a strong return on assets, which in turn, will generate adequate spread income to support the company's liabilities, operations, and profitability. The company's investment strategy is to supplement the company's core fixed income investment portfolio with opportunistic investments in alpha-producing specialty sub-sectors like middle market credit and sectors with contractually strong cash flows like real estate and infrastructure, including private equity assets.
The Foundational Capabilities pillar is focused on upgrading the company's operating platform to enhance the digital customer experience, create differentiation through data analytics to support the first three pillars, enhance core technology and align talent. The company has maintained personal service as one of the company's highest priorities and continues to strive for an unprecedented level of timely and accurate service to both the company's agents and policyholders. Examples of the company's service include a live person answering phone calls and issuing policies within 24 hours of receiving the application if the paperwork is in good order.
During 2023, the company continued to advance its AEL 2.0 strategy as the company executed against its key pillars.
Products
Fixed Index Annuities
Fixed index annuities allow policyholders to earn index credits based on the performance of a particular index without the risk of loss of their account value. Most of these products allow policyholders to transfer funds once a year among several different crediting strategies, including one or more index based strategies and a traditional fixed rate strategy. Bonus products represented 64% of the company's net annuity account values at December 31, 2023. The initial annuity deposit on these policies is increased at issuance by a specified premium bonus ranging from 8% to 10%. Generally, the surrender charge and bonus vesting provisions of the company's policies are structured such that the company has comparable protection from early termination between bonus and non-bonus products.
The initial caps and participation rates are largely a function of the cost of the call options the company purchases to fund the index credits, the interest rate the company can earn on invested assets acquired with new annuity deposits and the rates offered on similar products by the company's competitors. For subsequent adjustments to caps and participation rates, the company takes into account the cost of the call options the company purchases to fund the index credits, yield on the company's investment portfolio, annuity surrender and withdrawal assumptions and crediting rate history for particular groups of annuity policies with similar characteristics.
Fixed Rate Annuities
Fixed rate deferred annuities include annual, multi-year rate guaranteed products ('MYGAs') and single premium deferred annuities ('SPDAs'). The company's annual reset fixed rate annuities have an annual interest rate (the 'crediting rate') that is guaranteed for the first policy year. After the first policy year, the company has the discretionary ability to change the crediting rate once annually to any rate at or above a guaranteed minimum rate. The company's MYGAs and SPDAs are similar to its annual reset products except that the initial crediting rate on MYGAs is guaranteed for up to five years before it may be changed at the company's discretion while the initial crediting rate on SPDAs is guaranteed for either three or five years. The minimum guaranteed rate on the company's annual reset fixed rate deferred annuities ranges from 1.00% to 4.00%, the initial guaranteed rate on the company's multi-year rate guaranteed deferred annuities and SPDAs range from 1.20% to 5.65%.
The company also sells single premium immediate annuities ('SPIAs'). The company's SPIAs provide a series of periodic payments for a fixed period of time or for life, according to the policyholder's choice at the time of issue. The amounts, frequency and length of time of the payments are fixed at the outset of the annuity contract. SPIAs are often purchased by persons at or near retirement age who desire a steady stream of payments over a future period of years.
Withdrawal Options - Fixed Index and Fixed Rate Annuities
Policyholders are typically permitted penalty-free withdrawals up to 10% of the contract value in each year after the first year, subject to limitations. Withdrawals in excess of allowable penalty-free amounts are assessed a surrender charge during a penalty period which ranges from 5 to 17 years for fixed index annuities and 3 to 15 years for fixed rate annuities from the date the policy is issued. This surrender charge initially ranges from 5% to 20% for fixed index annuities and 8% to 20% for fixed rate annuities of the contract value and generally decreases by approximately one-half to two percentage points per year during the surrender charge period. For certain policies, the premium bonus is considered in the establishment of the surrender charge percentages. For other policies, there is a vesting schedule ranging from 9 to 14 years that applies to the premium bonus and any interest earned on that premium bonus. Surrender charges and bonus vesting are set at levels aimed at protecting the company from loss on early terminations and reducing the likelihood of policyholders terminating their policies during periods of increasing interest rates. This practice enhances the company's ability to maintain profitability on such policies. Policyholders may elect to take the proceeds of the annuity either in a single payment or in a series of payments for life, for a fixed number of years or a combination of these payment options.
A significant amount of the company's fixed index annuity policies and many of the company's annual reset fixed rate deferred annuities have been issued with a lifetime income benefit rider. This rider provides an additional liquidity option to policyholders. With the lifetime income benefit rider, a policyholder can elect to receive guaranteed payments for life from their contract without requiring them to annuitize their contract value. The amount of the lifetime income benefit available is determined by the growth in the policy's income account value and the policyholder's age at the time the policyholder elects to begin receiving lifetime income benefit payments. The growth in the policy's income account value is based on the growth rate specified in the policy which ranges from 3.0% to 9.25% and the time period over which that growth rate is applied which ranges from 5 to 20 years for the majority of these policies. Generally, the time period consists of an initial period of up to 10 years and the policyholder has the option to elect to continue the time period for an additional period of up to 10 years. The company has the option to either increase the rider fee or decrease the specified growth rate, depending on the specifics of the policy, at the time the policyholder elects to continue the time period. Lifetime income benefit payments may be stopped and restarted at the election of the policyholder. Policyholders have the choice of selecting a rider with a base level of benefit for no explicit fee or paying a fee for a rider that has a higher level of benefits, and since 2013 the company has issued products where the addition of a rider to the policy is completely optional. Rider fees range from 0.15% to 1.60% of either the policy's account value or the policy's income account value. The additional value to the policyholder provided by these riders through the lifetime income benefit base is not transferable to other contracts, and the riders will improve the persistency of the contract.
Investments/Spread Management
Investment activities are an integral part of the company's business, and net investment income is a significant component of the company's total revenues. Profitability of the company's annuity products is significantly affected by spreads between interest yields on investments, the cost of options to fund the index credits on the company's fixed index annuities and rates credited on the company's fixed rate annuities and the fixed rate strategy in the company's fixed index annuities. The company manages the index-based risk component of the company's fixed index annuities by purchasing call options on the applicable indices to fund the index credits on these annuities and by adjusting the caps, participation rates and asset fees on policy anniversary dates to reflect the change in the cost of such options which varies based on market conditions. All options are purchased on the respective policy anniversary dates, and new options are purchased on each of the anniversary dates to fund the next index credits. All credited rates on annual reset fixed rate deferred annuities and the fixed rate strategy in fixed index annuities may be changed annually, subject to minimum guarantees. Changes in caps, participation rates and asset fees on fixed index annuities and crediting rates on fixed rate and fixed index annuities may not be sufficient to maintain targeted investment spreads in all economic and market environments. In addition, competition and other factors, including the potential for increases in surrenders and withdrawals, may limit the company's ability to adjust or to maintain caps, participation rates, asset fees and crediting rates at levels necessary to avoid narrowing of spreads under certain market conditions.
Marketing/Distribution
The company markets its products through a variable cost distribution network, including independent agents through IMOs, broker/dealers, banks and registered investment advisors. The company emphasizes high quality service to its agents, distribution partners and policyholders along with the prompt payment of commissions to the company's agents and distribution partners. This has been significant in building excellent relationships with the company's distribution network.
The company's independent agents and agencies range in profile from national sales organizations to personal producing general agents. A value proposition that the company emphasizes with agents is they have direct access to its senior leadership, giving the company an edge over larger and foreign-owned competitors. The company also emphasizes its products, service and the company's focused fixed annuity expertise. The company also has favorable relationships with its IMOs, which have enabled the company to efficiently sell through an expanded number of independent agents.
The independent agent distribution system is consisted of insurance brokers and marketing organizations. The company is pursuing a strategy to increase the efficiency of the company's independent agent distribution network by strengthening its relationships with key IMOs and are alert for opportunities to establish relationships with organizations not presently associated with the company. These organizations typically recruit agents for the company by advertising its products and the company's commission structure through direct mail advertising or seminars for insurance agents and brokers. The company monitors agent activity and will terminate those who have not produced business for the company in recent periods and are unlikely to sell its products in the future. The IMOs bear most of the cost incurred in marketing the company's products. American Equity Life has relationships with 47 national marketing organizations, through which nearly 34,277 independent agents are under contract. The company generally does not enter into exclusive arrangements with these marketing organizations.
Agents contracted with the company through four national marketing organizations accounted for approximately 52% of the annuity deposits and insurance premiums collected during 2023, and the company expects these organizations to continue as marketers for American Equity Life with a focus on selling the company's products.
Eagle Life's fixed index and fixed rate annuities are distributed pursuant to selling agreements with broker/dealers, banks and registered investment advisors. Eagle Life has 107 broker-dealer/firm selling agreements, through which nearly 13,992 representatives are appointed. Twenty-five of these agreements are with broker/dealers affiliated with banks. Relationships with certain of these firms are facilitated by third party wholesalers who promote Eagle Life and are compensated based upon the sales of the firms they have contracted with Eagle Life. The company has been developing its employee wholesaling force, which will be a key to the company's success at Eagle Life. Beginning in 2020, the majority of the company's third-party wholesaling partners no longer market Eagle Life products to new accounts as new account acquisition is handled almost entirely on an internal basis. American Equity Life to a lesser extent also sells through broker/dealers and the company has introduced products specifically for this distribution channel.
Reinsurance
Coinsurance
American Equity Life has three coinsurance agreements with Athene Life Re Ltd. ('Athene'), an unauthorized life reinsurer domiciled in Bermuda.
American Equity Life has two coinsurance agreements with EquiTrust Life Insurance Company ('EquiTrust').
Effective July 1, 2021, American Equity Life entered into a reinsurance agreement with North End Re (Cayman) SPC (the 'North End Re reinsurance treaty'), a wholly owned subsidiary of Brookfield Reinsurance to reinsure certain in-force fixed indexed annuity product liabilities as of the effective date of the reinsurance agreement, 70% on a modified coinsurance ('modco') basis and 30% on a coinsurance basis. The liabilities reinsured on a coinsurance basis are secured by assets held in trusts with American Equity Life as the beneficiary. The liabilities reinsured on a modco basis are secured by assets held by American Equity Life in a segregated modco account. American Equity Life will receive an annual ceding commission equal to 49 basis points and the company will receive an annual asset liability management fee equal to 30 basis points calculated based on the initial cash surrender value of liabilities ceded. Such fees are fixed and contractually guaranteed for six to seven years.
Effective October 1, 2022 American Equity Life entered into a reinsurance agreement with an unaffiliated reinsurer AeBe ISA LTD ('AeBe'), a Bermuda exempted company affiliated with 26North Holdings LP ('26North'), that is an incorporated segregated account licensed as a Class E reinsurer.
Intercompany Reinsurance Agreements
Effective October 1, 2021, American Equity Life entered into a coinsurance agreement with AEL Re Vermont Inc., its wholly-owned captive reinsurance company, to cede a portion of lifetime income benefit rider payments in excess of policy fund values and additional collateral contributed by American Equity Life on a funds withheld basis (the 'AEL Re Vermont Agreement'). In connection with the agreement, AEL Re Vermont entered into an excess of loss reinsurance agreement (the 'Hannover XOL treaty') with Hannover, to retrocede the lifetime income benefit rider payments in excess of the policy fund values ceded under the AEL Re Vermont Agreement upon exhaustion of the funds withheld account balance under the AEL Re Vermont Agreement, subject to a limit.
Effective December 31, 2021, American Equity Life entered into a coinsurance agreement with AEL Re Bermuda Ltd, an affiliated Bermuda reinsurer wholly owned by the company, to reinsure a quota share of fixed index annuities issued from January 1, 1997 through December 31, 2007 on a funds withheld basis.
Effective October 1, 2023, American Equity Life entered into a reinsurance agreement with AEL Re Vermont II, its wholly-owned captive reinsurance company, to cede both in-force (since October 1, 2021) and ongoing flow of lifetime income benefit rider payments in excess of policy fund values and additional collateral contributed by American Equity Life on a funds withheld basis (the 'VT II Agreement'). In connection with the agreement, AEL Re Vermont II entered into an excess of loss reinsurance agreement (the 'Canada Life XOL treaty') with The Canada Life Assurance Company, operating through its Barbados branch ('Canada Life'), to retrocede the lifetime income benefit rider payments in excess of the policy fund values ceded under the VT II Agreement after the funds withheld account balance is exhausted, subject to a limit.
Regulation
On February 1, 2023, the company acquired Entrada Life Insurance Company, an Arizona domestic insurance company ('Entrada').
The company and its counterparties are subject to the Dodd-Frank Wall Street Reform and Consumer Protection Act regulation of collateral posting, clearing, and reporting of over-the-counter derivatives transactions.
Other regulations with a significant impact on the company's operations include the New York State Department of Financial Services cybersecurity requirements for financial services companies (the 'Cybersecurity Regulation') and the California Consumer Privacy Act (the 'CCPA').
The company provides products and services to certain employee benefit plans that are subject to the Employee Retirement Income Security Act ('ERISA') and the Internal Revenue Code of 1986, as amended (the 'Code').
One of the company's subsidiaries is registered with the SEC as a broker-dealer under the Exchange Act and a member of, and subject to regulation by, FINRA.
History
The company was founded in 1995. It was incorporated in 1995. The company was formerly known as American Equity Investment Life Holding Company and changed its name to American National Group Inc. in 2024.
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