OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term 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 Long Term ICR of “bbb-” of American Equity Investment Life Holding Company [NYSE: AEL] and its existing Long Term Issue Credit Ratings (Long-Terms IRs). The outlook for all of these Credit Ratings (ratings) is stable. All companies are domiciled in West Des Moines, IA, unless otherwise specified. (Please see below for detailed listing of the Long-Term IRs).
The rating affirmations reflect 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 some diversification to AEL’s distribution channels. GAAP and statutory earnings have benefited from strong sales growth, relatively stable investment margins and overall growth in assets under management. Risk-adjusted capitalization remains adequate for its investment, insurance and business risks. Finally, financial leverage and interest coverage ratios are within AM. Best’s expectations for the current ratings.
Partially offsetting these positive factors are AEL’s concentration in FIAs, which have a high percentage of living benefit guarantees, some distributor concentration and the potential for margin compression in the low interest rate environment. Additionally, there is the potential for some dis-intermediation risk should interest rates rise, although this risk is partially mitigated by strong surrender charge protection. The high percentage of liabilities with living benefit guarantees offset some of the disintermediation risk. Despite continued strong sales, 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. A.M. Best also notes an elevated investment risk relative to benchmarks as measured by higher risk assets to capital.
The following Long-Term IRs have been affirmed:
American Equity Investment Life Holding Company
— “bbb-” USD 400 million 6.625% senior unsecured notes due 2021
—
“bbb-” USD 500 million 5% senior unsecured notes due 2027
The following indicative Long-Term IRs 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 Credit Ratings 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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