A.M. Best Affirms Ratings of American Equity Investment Life Holding Company and Its Subsidiaries
January 14 2015 - 4:40PM
Business Wire
A.M. Best has affirmed the financial strength rating of
A- (Excellent) and issuer credit ratings (ICR) of “a-” of
American Equity Investment Life Insurance Company 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 debt and shelf ratings
of AEILIC’s parent, American Equity Investment Life Holding
Company [NYSE:AEL]. 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 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. AEL has reported favorable statutory and
U.S. GAAP operating earnings due to stable premium trends and
management of interest rate margins. Risk-adjusted capitalization
remains adequate for its investment, insurance and business risks,
supported by a well-diversified investment portfolio. Despite an
increase in debt at the holding company following a debt issuance
in 2013, the company’s financial leverage and interest coverage
ratios are within guidelines for the current rating, and are
expected to improve slightly following the redemption and maturity
of its outstanding convertible notes.
Partially offsetting these positive factors is AEL’s
concentration in FIAs, with only modest product diversification.
New market entrants have heightened the competitiveness of the FIA
market and may pressure AEL’s growth and strain future operating
performance. Furthermore, the continued low interest rate
environment and potential for higher derivative costs from equity
market volatility may negatively impact operating returns.
Additionally, the commercial mortgage loan portfolio maintains a
moderate percentage of loans with weak debt service coverage
ratios. A.M. Best notes that the risk of disintermediation under
rising interest rate scenarios is relatively low given the strong
surrender charge coverage on the majority of AEL’s policies.
Positive rating action for American Equity Investment Life and
its subsidiaries is unlikely due to its concentrated business and
reserve profile that remains highly interest-rate sensitive.
Factors that could lead to negative rating actions include a
weakened market position, unfavorable trends in net premiums
written or interest rate margins, or declines in risk-adjusted
capitalization.
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
-- “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
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
www.ambest.com/ratings/methodology.
Key insurance criteria reports
utilized:
- A.M. Best's Liquidity Model for U.S.
Life Insurers
- Analyzing Insurance Holding Company
Liquidity
- Equity Credit for Hybrid
Securities
- Insurance Holding Company and Debt
Ratings
- Rating Members of Insurance Groups
- Evaluating U.S. Surplus Notes
- Risk Management and the Rating Process
for Insurance Companies
- Understanding BCAR for U.S. and
Canadian Life/Health Insurers
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 visit A.M.
Best’s Ratings & Criteria Center.
A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2015 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
A.M. BestKeith Behrmann, 908-439-2200, ext.
5733Financial
Analystkeith.behrmann@ambest.comorRosemarie
Mirabella, 908-439-2200, ext. 5892Assistant Vice
Presidentrosemarie.mirabella@ambest.comorChristopher
Sharkey, 908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
908-439-2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
American Equity Investme... (NYSE:AEL)
Historical Stock Chart
From Mar 2024 to Apr 2024
American Equity Investme... (NYSE:AEL)
Historical Stock Chart
From Apr 2023 to Apr 2024