A.M. Best Affirms Ratings of American Equity Investment Life Holding Company and Its Subsidiaries
January 10, 2014 by Best's News Service
OLDWICK, N.J. – A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit ratings of “a-” of American Equity Investment Life Insurance Company (AEILIC) and its subsidiaries, American Equity Investment Life Insurance Company of New York (Lake Success, NY) and Eagle Life Insurance Company. Concurrently, A.M. Best has affirmed the ICR of “bbb-” and the debt ratings of AEILIC’s parent, American Equity Investment Life Holding Company (AEL) [NYSE:AEL]. Additionally, A.M. Best has affirmed the indicative ratings under the shelf registration of AEL and American Equity Capital Trust V and VI. The outlook for all ratings is stable. All companies are domiciled in West Des Moines, IA, unless otherwise specified. (Please see below for detailed listing of the debt ratings.)
The ratings reflect AEL’s formidable market position and long track record in the fixed indexed annuity marketplace, consistently favorable premiums and earnings results, adequate risk-adjusted capitalization, good asset liability management and effective hedge programs to support its fixed indexed annuity business.
Partially offsetting these positive rating factors are the organization’s relatively mono-line business profile, high level of intangible assets to equity (as a result of continuing growth from its fixed indexed annuities), somewhat high exposure to structured mortgage-backed securities and commercial mortgage loans relative to capital and surplus as well as the increased financial leverage ratios due to a recent additional debt issuance. A.M. Best notes that while elevated, the financial leverage ratios are within the guidelines for the current ratings and may be reduced as certain debts are redeemed going forward.
The ratings for AEL and its subsidiaries are well positioned at their current level. Factors that could result in negative rating actions include unfavorable trends in revenue and interest rate spreads, which could negatively impact earnings relative to A.M. Best’s expectations, continued increases in intangible assets relative to total equity as well as a material decline in risk-adjusted capitalization compared to its historical trends.
The following debt ratings have been affirmed:
American Equity Investment Life Holding Company—
– “bbb-” on $200 million 3.5% senior unsecured convertible notes, due 2015 ($192.0 million outstanding)
– “bbb-” on $116 million 5.25% senior unsecured convertible notes, due 2029 ($68.4 million outstanding)
– “bbb-” on $400 million 6.625% senior unsecured notes, due 2021 ($400 million outstanding)
The following indicative ratings under the shelf registration have been affirmed:
American Equity Investment Life Holding Company—
– “bbb-” on senior unsecured debt
– “bb+” on subordinated debt
– “bb” on preferred stock
American Equity Capital Trust V and VI—
– “bb” on trust preferred securities
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at http://www.ambest.com/ratings/methodology. BN-NJ-01-10-2014 1524 ET #
