A.M. Best Downgrades Ratings of American Equity Investment Life and Its Subsidiary.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Aug. 1, 2002 A.M. Best Co. has downgraded the financial strength ratings to B++ (Very Good) from A- (Excellent) of American Equity Investment Life Insurance Company (American Equity) (Des Moines Des Moines, city, United States Des Moines (dĭ moin`), city (1990 pop. 193,187), state capital and seat of Polk co., S central Iowa, at the junction of the Des Moines and Raccoon rivers; inc. , IA) and its subsidiary, American Equity Investment Life Insurance Company of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . Concurrently, the ratings have been assigned a negative outlook. The rating reflects the decline in risk-adjusted capitalization of the insurance operations due to the rapid growth of the company's core individual annuity operations. Between 1997 and 2001, net premiums written grew from $153 million to nearly $2 billion, while invested assets increased from $209 million to almost $4 billion. During the same period, capital and surplus nearly tripled; however, the strain from the growth in new business has reduced the company's risk-adjusted capital position. The growth in American Equity's asset base continues in 2002, as invested assets are now approaching $5 billion. A.M. Best notes that the parent holding company, American Equity Investment Life Holding Company, has various capital raising initiatives underway. In the past six years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time holding company has infused over $170 million in capital into the life operations; however, given the holding company's leverage position and the current difficult economic conditions in the corporate debt and equity markets, A.M. Best believes the organization's financial flexibility is limited. The ratings of American Equity and its subsidiary are supported by the organization's strong distribution system, conservative high quality investment portfolio and strong liquidity position. The company produced record sales results in 2001. American Equity maintains a portfolio of competitive fixed interest and equity-indexed annuity equity-indexed annuity A contract with an insurance company that promises periodic payments keyed in a specified manner to a stock market index. Unlike variable annuities, equity-indexed annuities specify a guaranteed minimum return that is typically 3%. products, which are distributed by a combination of national and regional marketing organizations and personal producing general agents. The decline in the equity markets and the reduced attractiveness of variable annuity Variable Annuity An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio. products combined to generate strong interest in the fixed interest and equity-indexed annuity products offered by the company. American Equity also has a very conservative investment philosophy, with the majority of assets comprised of government-backed fixed-income securities Fixed-income securities Investments that have specific interest rates, such as bonds. . The company's high quality investment portfolio, combined with the relatively stable nature of its liability base (due to the high proportion of its annuity contracts Annuity Contract The written agreement between an insurance company and a customer outlining each party's obligations in an annuity coverage agreement. This document will include the specific details of the contract, such as the structure of the annuity (variable or fixed), any with substantial surrender charge Surrender Charge A fee levied on a life insurance policyholder upon cancellation of his or her life insurance policy. The fee is used to cover the costs of keeping the insurance policy on the insurance provider's books. protection), helps the company maintain favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. liquidity measures. A.M. Best will continue to closely monitor the risk-adjusted capital position of the insurance operations, as well as the capital raising efforts of the holding company in consideration of future rating actions. 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 www.ambest.com. |
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