A.M. Best Co.
has affirmed the financial strength rating of A- (Excellent) and issuer credit ratings (ICR) of “a-” of
American Equity Investment Life Insurance Company
(American Equity Life) and its subsidiaries,
American Equity Investment Life Insurance Company of New York
(New York, NY) and
Eagle Life Insurance Company
Concurrently, A.M. Best has affirmed the ICR of “bbb-” and all debt ratings of American Equity Life’s parent,
American Equity Investment Life Holding Company
(AEL) [NYSE: AEL], as well as the indicative ratings under the shelf registration of
American Equity Capital Trust V and VI
. The outlook for all ratings is stable. All companies are domiciled in Des Moines, IA, unless otherwise specified. (See below for a detailed list of all debt ratings.)
The ratings recognize American Equity’s leading role in the fixed indexed annuity marketplace, strong risk-adjusted capitalization, continued positive trends of statutory and GAAP operating earnings and strong surrender protection charges to mitigate potential disintermediation risk. In addition, A.M. Best views the financial leverage and interest coverage ratios of AEL within the guidelines for its current ratings.
American Equity Life continues to benefit from strong growth in its core fixed-indexed annuity business and diverse distribution relationships. On a risk-adjusted basis, the company’s capitalization trends have strengthened over the past five years despite its accelerated new business growth and high demand on its capital resources. Its enterprise risk management and asset liability matching strategies remain supportive of the ratings.
Partially offsetting these positive rating factors are American Equity Life’s mono-line business profile with significant product concentration risk from fixed indexed annuities, its relatively high level of acquisition costs, relatively high exposure to residential mortgage-backed securities (RMBS) and commercial mortgages, exposure to the risk of narrowing spreads in the current low interest rate environment and the entrance of new competitors into the fixed indexed annuity marketplace, which could pressure profit margins and growth opportunities.