A.M. Best Assigns Debt Rating to American Equity Investment Life Holding Company's Convertible Notes.OLDWICK, N.J. -- A.M. Best Co. has assigned a rating of "bb+" to the $250 million 5.25% convertible senior unsecured notes issued by American Equity Investment Life Holding Company (American Equity) (NYSE NYSE See: New York Stock Exchange :AEL AEL Association Electronique Libre AEL Appalachia Educational Laboratory AEL Arabisch Europese Liga AEL Agence de l'Energie AEL Arab European League AEL Accessible Emission Limit AEL Acceptable Exposure Limit AEL Arquivo Edgard Leuenroth ) (West Des Moines West Des Moines (də moin`), city (1990 pop. 31,702), Polk co., S central Iowa, a growing suburb W of Des Moines; inc. 1893 as Valley Junction, renamed 1938. Products manufactured there include cement, metal items, and pumps. , IA). The financial strength rating of B++ (Very Good) of American Equity's insurance subsidiaries is unaffected. The outlook for all ratings is stable. The notes are scheduled to mature in December 2024, are convertible into the company's common stock under certain circumstances, callable Callable Applies mainly to convertible securities. Redeemable by the issuer before the scheduled maturity under specific conditions and at a stated price, which usually begins at a premium to par and declines annually. after seven years and contain a put option provision. The put provision becomes exercisable upon a change of control or at predetermined pre·de·ter·mine v. pre·de·ter·mined, pre·de·ter·min·ing, pre·de·ter·mines v.tr. 1. To determine, decide, or establish in advance: maturity dates beginning in December 2011. Additionally, the notes offer a contingent interest contingent interest n. an interest in real property which, according to the deed (or a will or trust), a party will receive only if a certain event occurs or certain circumstances happen. option that provides certain tax advantages to the organization. The proceeds from the offering are expected to enhance American Equity's liquidity position and insurance subsidiary capitalization as funds are downstreamed to support future business growth. A.M. Best notes that American Equity's overall financial leverage has increased significantly but is within acceptable limits for its current rating category. A.M. Best expects that American Equity's interest coverage will remain adequate, particularly in light of its improved operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before . However, A.M. Best notes that the increase in leverage, coupled with American Equity's existing asset/liability mismatch and aggressive business development plans, could negatively impact the company's prospective earnings, particularly in a rapidly rising interest rate environment. American Equity's capital on a qualitative basis is somewhat diluted by a high deferred acquisition cost (DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter )/equity ratio relative to the industry, which is partially offset by strong surrender charge protection and high remaining surrender periods. Additional factors offsetting these concerns include American Equity's improving operating profile and its strong market position within the equity indexed annuity marketplace. The following debt rating has been assigned: American Equity Investment Life Holding Company-- --"bb+" on $250 million 5.25% convertible senior unsecured notes, due 2024 For a list of A.M. Best's debt ratings, please visit http://www.ambest.com/debt. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com. |
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