American Equity Investment Life Holding Co., the insurer that acquired municipal and corporate debt this year, is keeping cash longer as it searches for investments.
“We were holding several hundred million dollars average cash balances” in the third quarter, Chief Executive Officer Wendy Waugaman said yesterday in an interview at Bloomberg’s New York headquarters. “That’s an expensive decision because when we’re holding those assets in cash clearly we aren’t earning the yield that we need to be able to operate our business.”
American Equity reported at least $572 million in cash every quarter during 2011, according to filings. Investments in corporate debt increased from $7.1 billion at the end of 2010 to $8.8 billion on Sept. 30, a filing shows. The West Des Moines, Iowa-based company boosted municipal-bond holdings 17 percent to $2.8 billion in the same period.
“We had held agency bonds and they represented a very large percentage of our portfolio for a long time,” Waugaman said. “Opportunities don’t exist anymore in the agency market, or only on a limited basis, and so we’ve turned our focus instead to principally high-grade corporates.”
American Equity rose 6.4 percent to $11.06 yesterday in New York. It has fallen 12 percent this year compared with a 5.9 percent decline of the Russell 2000 Index.