AM Best confirms the credit ratings of American Equity Investment Life Insurance Company and its subsidiaries

OLDWICK, NJ–(BUSINESS WIRE)–AM Best Affirmed Financial Strength Rating (FSR) of A- (Excellent) and Issuer Long Term Credit Rating (Long Term ICR) of “a-” (Excellent) from 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. At the same time, AM Best confirmed the long-term ICR of “bbb-” (good) of American Equity Investment Life Holding Company [NYSE: AEL] and its long-term issue credit ratings (long-term IR). The outlook for these Credit Ratings (ratings) is stable. All companies are domiciled in West Des Moines, IA, unless otherwise noted. (Please see detailed list of long-term IRs below).

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 management of business risks.

AEL continued to improve its risk-based capital to a very high level compared to the previous year, as measured by Best’s capital adequacy ratio (BCAR), mainly through increased use of affiliated and unaffiliated reinsurance. The company’s venture capital benefited from a major planned shift in investment strategy towards private debt, real estate and infrastructure assets, under a new business strategy known as AEL 2.0. The group is still in the process of moving from a pure return on equity model to a multi-year recurring return on assets model, in which other parties provide the necessary equity. The new strategy, if successful, should result in more diversified revenue streams beyond spread-based revenue to include asset management fee revenue and potential longer-term reinsurance revenue. Operational performance in 2021 continued with record sales of around $6 billion, driven by new partnerships as well as new product launches, but it remains to be seen whether the new strategy can maintain the pace of growth in sales.

AM Best expects AEL’s investment portfolio to become less liquid due to the revised strategy, although overall long-term returns should improve. AEL’s current investment portfolio contains some credit risk, with a high percentage of secured loan obligations invested in triple-B tranches, an increase in below-investment-grade bonds and investment exposure. in retail commercial mortgages. However, these asset classes are currently doing well, with low levels of credit writedowns. AM Best will continue to monitor these investments, as well as AEL’s ability to continue to execute on its AEL 2.0 strategy. Going forward, AM Best expects AEL to maintain sufficient risk-adjusted capital at least at the high level to support its overall balance sheet valuation. The holding company’s overall liquidity is viewed favorably, with leverage and interest coverage ratios still in line with AM Best’s expectations.

AEL continues to focus 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 domestically, particularly in the independent marketing organization channel. AEL will continue to face an increasingly competitive market, but it projects profitable growth, as reflected in its revised business model.

The following long-term IRs have been confirmed 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 of 6.625% perpetual non-cumulative preferred shares

— “bb” (fair) on $400 million of 5.95% non-cumulative perpetual preferred shares

The following indicative long-term IRs under pre-registration have been confirmed with a stable outlook:

American Equity Investment Life Holding Company—

— “bbb-” (good) on senior unsecured debt

— “bb+” (Fair) on subordinated debt

— “bb” (equitable) on preferred shares

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 relevant disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Assessment Activity Web page. For more information on the use and limitations of credit rating opinions, please see Best Credit Score Guide. For more information on the proper use of Best’s Credit Scores, Best’s Performance Ratings, Best’s Preliminary Credit Ratings, and AM Best’s press releases, please see Guide to Proper Use of Best’s Ratings and Reviews.

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 more than 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 AM Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Comments are closed.