AM Best Affirms Credit Ratings of American Equity Investment Life Insurance Company and Its Subsidiaries
September 09 2022 - 9:07AM
Business Wire
AM Best has affirmed the Financial Strength Rating (FSR)
of A- (Excellent) and the Long-Term Issuer Credit Ratings
(Long-Term ICR) of “a-” (Excellent) 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, AM Best has affirmed the Long Term ICR of
“bbb-”(Good) of American Equity Investment Life Holding Company
[NYSE: AEL] and its Long Term Issue Credit Ratings (Long-Terms
IRs). The outlook 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 ratings reflect AEL’s balance sheet strength, which AM Best
assesses as adequate, as well as its strong operating performance,
neutral business profile and appropriate enterprise risk
management.
AEL has continued to improve their risk-based capital to a very
strong level from strong the prior year, as measured by Best’s
Capital Adequacy Ratio (BCAR), mainly on higher utilization of
affiliated and unaffiliated reinsurance. The company’s risk-based
capital has benefited from a significant planned change in
investment strategy toward private debt, real estate and
infrastructure assets, as part of a new business strategy known as
AEL 2.0. The group is still transitioning from a pure
return-on-equity model to a multi-year recurring return-on-assets
model, whereby other parties provide the required equity. The new
strategy, if successful, should result in more diversified sources
of earnings beyond spread-based earnings to include asset
management fee income and longer-term potential reinsurance income.
Operating performance in 2021 continued with record sales of
approximately $6 billion, led by new partnerships as well as some
new product launches, but it remains to be seen if the new strategy
can maintain the sales growth pace.
AM Best expects AEL’s investment portfolio to become less liquid
as a result of the revised strategy, although overall yields in the
longer term are expected to improve. AEL’s current investment
portfolio contains some credit risk, with a high percentage of
collateralized loan obligations invested in triple-B tranches, an
increase in below investment grade bonds and exposure to
strip-retail commercial mortgage loan investments. However, these
asset classes are performing well currently, with low levels of
credit impairments. AM Best will continue to monitor these
investments, along with AEL’s ability to continue to execute its
AEL 2.0 strategy. Going forward, AM Best expects AEL to maintain
sufficient risk-adjusted capital at least at the strong level to
support its overall balance sheet assessment. Overall holding
company liquidity is viewed favorably, with financial leverage and
interest coverage ratios still within AM Best’s expectations.
AEL continues to remain concentrated on fixed-index annuity
products. Although AEL’s business profile is neutral, it maintains
a strong market position in the increasingly competitive
fixed-index annuity segment nationally, especially in the
independent marketing organization channel. AEL will continue to
face an increasingly highly competitive market, but it projects
profitable growth, as it emerges from its revised business
model.
The following Long-Term IRs have been affirmed with a stable
outlook:
American Equity Investment Life Holding Company— — “bbb-” (Good)
on $500 million 5% senior unsecured notes due 2027 — “bb” (Fair) on
$300 million 6.625% perpetual, non-cumulative preferred stock —
“bb” (Fair) on $400 million 5.95% perpetual, non-cumulative
preferred stock
The following indicative Long-Term IRs under the shelf
registration have been affirmed with a stable outlook:
American Equity Investment Life Holding Company— — “bbb-” (Good)
on senior unsecured debt — “bb+”(Fair) on subordinated debt — “bb”
(Fair) on preferred stock
This press release relates to Credit Ratings that have been
published on AM 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 AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please
view Guide to Best's Credit Ratings. For information
on the proper use of Best’s Credit Ratings, Best’s Performance
Assessments, Best’s Preliminary Credit Assessments and AM Best
press releases, please view Guide to Proper Use of Best’s
Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
Copyright © 2022 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Igor Bass Senior Financial Analyst +1 908 439
2200, ext. 5109 igor.bass@ambest.com
Christopher Sharkey Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Jacqalene Lentz Director +1 908 439 2200, ext.
5762 jacqalene.lentz@ambest.com
Jeff Mango Managing Director, Strategy &
Communications +1 908 439 2200, ext. 5204
jeffrey.mango@ambest.com
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