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 secuities 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
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
The following indicative ratings under the shelf registration have been
-- "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.
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 © 2014 by A.M. Best Company, Inc. ALL RIGHTS
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