American Equity seeks $247.3 million through IPO

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American Equity Investment Life Holding Co., a West Des Moines-based seller of annuities and life insurance products, has filed registration materials with the Securities and Exchange Commission for an initial public offering of common stock to raise money and expand sales.

The move would represent the first IPO for an Iowa company since Principal Financial Group Inc. became the first insurer to sell its shares to the public in the aftermath of the terrorist attacks of Sept. 11, 2001. American Equity hopes to raise $247.3 million.

The company, which had total assets of $6.3 billion as of June 30, is about the same size in terms of assets as Farm Bureau Life Insurance Co., the life insurance arm of FBL Financial Group Inc., and about a third the size of AmerUs Group Co., one of its biggest competitors. Other rivals include Allianz Life Insurance of North America and Midland National Life Insurance Co.

Under Chairman and Chief Executive David Noble, American Equity intends to use the proceeds from the public offering to add to its roster of 41,000 independent agents who currently sell its products, as well as create new types of products for them to sell.

“The purpose of this offering is to raise capital to support future growth of our business,” the company wrote in a prospectus filed with the SEC. “If it is successful, we anticipate increasing the level of our sales. For instance, we anticipate the reinstatement of our full marketing program and development of new products.”

American Equity has a history of innovation. It was the first company to offer annuity products whose returns are indexed to the performance of the Dow Jones industrial average.

The company was formed in 1995 by Noble, John Matovina, Kevin Wingert, James Gerlach, Terry Reimer and Debra Richardson, who were officers of The Statesman Group Inc. and today are leaders of American Equity. The young company acquired two blocks of insurance from Statesman’s main operating subsidiary, American Life and Casualty Insurance Co.

In September 1996, American Equity acquired Century Life Insurance Co., which gave it the ability to sell insurance products in 23 states and the District of Columbia. Today, the company sells its products in 46 states and the District of Columbia.  The company has grown rapidly. Since 1998, net income has risen more than 58-fold to $14.2 million from $244,000, the company said in its filing. Revenues during that period have jumped to $280 million from $38 million.

Like other insurers, American Equity’s sales and its ability to hold on to customers could also be hurt if its financial strength ratings are downgraded. The company currently has a rating of “B++” with a negative outlook from A.M. Best Co. and “BBB+” with a negative outlook from Standard & Poor’s Corp., which has said that it may revise the rating to “stable” if American Equity’s managers achieve certain goals related to capitalization and exposure to changes in interest rates.

The company markets its products primarily to U.S. residents who are 45 to 75 years of age. About 60 percent of the company’s total annuity deposits were derived from sales of indexed annuities, with sales of fixed annuity products accounting for about 40 percent and sales of variable annuities making up less than 1 percent. It has its greatest geographic concentration of sales in California, Florida, Texas and Illinois.

The company’s executive officers and board members owned about 31 percent of American Equity’s common stock as of June 30.

Merrill Lynch & Co. is the lead underwriter of the offering. Advest Inc. is co-manager.