A.M. Best Affirms Ratings of American Equity Investment Life Insurance Company and Its Subsidiaries

  A.M. Best Affirms Ratings of American Equity Investment Life Insurance
  Company and Its Subsidiaries

Business Wire

OLDWICK, N.J. -- January 25, 2013

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and
issuer credit ratings of “a-” of American Equity Investment Life Insurance
Company (American Equity Life) and its subsidiaries, American Equity
Investment Life Insurance Company of New York 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 West Des Moines, IA, unless
otherwise specified. (See below for a detailed list of all debt ratings.)

The rating affirmations acknowledge AEL’s leading market position in the fixed
indexed annuity marketplace, its more than adequate risk-adjusted
capitalization relative to its insurance and investment risks, its positive
premium and earnings trends in recent years and strong surrender charge
protection to mitigate any potential disintermediation risk. A.M. Best also
notes that AEL’s financial leverage and interest coverage ratios are within
the guidelines for its current ratings.

Partially mitigating factors include the impact of spread compression on AEL’s
earnings resulting from the low interest rate environment, its exposure to
product concentration risk from its mono-line product profile, and relatively
high levels of residential mortgage-backed securities and commercial holdings,
which represent an amount in excess of statutory capital and surplus.

The ratings for AEL and its subsidiaries are well positioned at the current
level. Key rating drivers that may lead to negative rating actions include a
decrease in the organization’s risk-adjusted capitalization due to operating
losses and write-downs from investments, sustained pressure on spread margins
from increased competition and low interest rates and a significant
deterioration in financial leverage or interest coverage ratios.

The following debt ratings have been affirmed:

American Equity Investment Life Holding Company—
-- “bbb-” on $200 million 3.50% senior unsecured convertible notes, due 2015
($200 million currently outstanding with a September 30, 2012, GAAP carrying
value of $176 million)
-- “bbb-” on $260 million 5.25% senior unsecured convertible notes, due 2024
($28.3 million currently outstanding with a September 30, 2012, GAAP carrying
value of $28 million)
-- “bbb-” on $116 million 5.25% senior unsecured convertible notes, due 2029
($116 million currently outstanding with a September 30, 2012, GAAP carrying
value of $102 million)

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. Key criteria utilized include: “Understanding BCAR for Life/Health
Insurers”; “Insurance Holding Company and Debt Ratings”; and “Risk Management
and the Rating Process for Insurance Companies.”

Best’s Credit Rating Methodology can be found at
www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more information,
visit www.ambest.com

       Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contact:

A.M. Best Co.
Frank Walko, 908-439-2200, ext. 5072
Financial Analyst
frank.walko@ambest.com
or
Raj H. Shah, 908-439-2200, ext. 5409
Assistant Vice President
raj.shah@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com