• ‘What a difference a year makes,’ AEL Chief Matovina says
  • Insurer says it may increase securitized bets to gain yield

American Equity Investment Life Holding Co., which has seen the value of its stock plunge by half over the past year, said the energy market slump, new regulation from the U.S. Department of Labor and the U.K. decision to leave the European Union have all contributed to the rout.

“Wow, what a difference a year makes,” Chief Executive Officer John Matovina said Tuesday at a conference in Des Moines, Iowa. “That just goes to show you what an energy credit scare, a DOL scare, and now a Brexit will do to a company that’s heavily influenced by what happens in the interest-rate environment.”

The insurer plunged the most since 2009 in April when the DOL announced rules that will tighten standards for the sale of fixed-indexed annuities, a crucial product for American Equity. The energy shock pressured the value of some bond holdings. And the Brexit vote pushed down yields, which could reduce income from investments backing insurance obligations.

American Equity recorded about $1.7 billion of fixed-indexed annuity sales in the first quarter, ranking second in the U.S. behind Allianz SE, a much larger and more diversified company, according to data from Limra, an industry trade group. Those products give investors returns linked to index performances and can offer some protection against slumps. The U.S. government is seeking to crack down against advisers pushing high-fee products that might not be in the best interest of their clients.

Market Overreaction

“Our view is the market has overreacted to the DOL uncertainty,” Matovina said. “While the DOL rule puts a cloud on the future growth opportunities and the value of that production, we think there’s still value there” in the contracts that American Equity has already written in prior periods.

The insurer also said Tuesday that it’s considering investments in more securitized assets to counter low yields in the bond market. American Equity slipped 1 cent to $13.59 at 3:25 p.m. in New York. That compares with a closing price of $27.44 on June 26 last year.

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