A.M. Best Affirms Ratings of American Equity Investment Life Holding Company and Its Subsidiaries
April 14 2016 - 3:45PM
Business Wire
A.M. Best has affirmed the financial strength rating of
A- (Excellent) and the issuer credit ratings (ICR) 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, collectively referred to as AEL.
Concurrently, A.M. Best has affirmed the ICR of “bbb-” and the
issue and shelf ratings of AEILIC’s parent, American Equity
Investment Life Holding Company [NYSE:AEL]. The outlook for
each rating is stable. All companies are domiciled in West Des
Moines, IA, unless otherwise specified. (Please see below for
detailed listing of the issue and shelf ratings.)
The affirmation of the ratings reflects AEL’s position as a
leading provider of fixed-indexed annuities (FIA), consistently
ranking in the top three by market share. Additionally, the
expanded utilization of Eagle Life Insurance Company to offer FIAs
through broker-dealers provides diversification to AEL’s
distribution channels. GAAP and statutory earnings have benefited
from strong sales growth, stable investment margins and overall
growth in assets under management. Risk-adjusted capitalization
remains adequate for its investment, insurance and business risks.
Financial leverage and interest coverage ratios are within
guidelines for the current ratings.
Partially offsetting these positive factors is AEL’s
concentration in FIAs, with only modest product diversification and
high interest rate sensitivity. While rising interest rates could
create dis-intermediation risks, A.M. Best notes that AEL’s
liability profile is well protected by strong surrender charges of
long duration. Despite a record sales year in 2015, AEL faces
increased competition within the FIA market which could pressure
growth and strain future operating performance. Additionally, the
recent adoption of the U.S. Department of Labor rule requiring
higher fiduciary standards for tax qualified fixed annuity writers
may also impact top line revenue growth and increase operating
costs. A.M. Best notes an increase in overall investment risk as
measured by higher risk assets to capital. Finally, while the fixed
income portfolio in the aggregate remains in a net unrealized gain
position, there has also been an increase in the gross unrealized
loss position of the bond portfolio.
Key rating factors that could result in a positive rating action
include a modification of the business profile to include a
substantial volume of creditworthy business that diversifies the
risks related to the mono-line annuity product line, such as
ordinary life insurance.
Key rating factors that could result in a negative rating action
include an unfavorable operating performance through declining
premium trends or reduced investment yields, a material increase in
investment write-downs or higher unrealized losses within the
investment portfolio due to rising credit risk. Additionally, a
significant decline in absolute or risk-adjusted capitalization
could result in a negative rating action.
The following issue rating has been affirmed:
American Equity Investment Life Holding Company— “bbb-”
on $400 million 6.625% senior unsecured notes, due 2021
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
This press release relates to rating(s) that have been
published on A.M. Best’s website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please see A.M.
Best’s Recent Rating Activity web page.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating
Services, Inc. ALL RIGHTS RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20160414006591/en/
A.M. BestSteve Vincent, +1-908-439-2200, ext.
5802Senior Financial
Analyststeve.vincent@ambest.comorRosemarie Mirabella,
+1-908-439-2200, ext. 5892Assistant Vice
Presidentrosemarie.mirabella@ambest.comorChristopher
Sharkey, +1-908 439 2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
+1-908-439-2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
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