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.

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