American Equity Investment Life Announces a Fixed-Rate Reset Preferred

American Equity Investment Life Holding Company (AEL) has announced a new $25 preferred issue.

This is another Fixed-Rate Reset issue, which means it will have an initial fixed rate until 12/1/2024 at which time the company can optionally redeem the issue–or reset the coupon based upon the 5 year treasury plus a “spread”.

There after as long as the issue is outstanding the coupon will be reset every 5 years at the 5 year treasury plus the “spread).

The issue will be non-cumulative, but should be qualifed. The permanent ticker will be AEL-A once trading begins on the NYSE.

The issue will trade on the OTC Grey market, but the temporary ticker has not been announced yet.

The preliminary prospectus can be read here.

Insurance rating agency AM Best had previously rated the company and you can read a previous press release here.

I find no credit ratings from Moodys, Fitch or S&P.

I am not familiar with the company–but could have an interest. When I don’t recognize a company I do extra deep digging to avoid surprising ‘history’.

As usual mcg was right on top of this announcement with SteveA tracking down some ratings.

9 thoughts on “American Equity Investment Life Announces a Fixed-Rate Reset Preferred”

  1. Fitch ratings. Trust preferred securities are BB-. Unsecured notes are BB+

    RATING ACTIONS Fitch has affirmed the following ratings: American Equity Investment Life Holding Company –IDR at ‘BBB-‘; –5.00% senior unsecured notes due 2027 at ‘BB+’; –Trust preferred securities at ‘BB-‘; American Equity Investment Life Insurance Company American Equity Investment Life Insurance Company of New York Eagle Life Insurance Company –IFS at ‘BBB+

    https://www.reuters.com/article/fitch-affirms-american-equitys-ratings-o/fitch-affirms-american-equitys-ratings-outlook-stable-idUSFitbQJcGl

      1. Steve, though not mentioned often, these words from your link are nice to see. Due to the lack of mandatory deferral features, Fitch views the securities as having “minimal” non-performance risk as defined in Fitch’s criteria.
        This means there arent a lot of mandated covenant provisions that retail slobs like us would never uncover reading for days on end. See these things can be onerous to a non cum preferred financial. Meaning, the board has no option but to suspend dividend because of some other debt protection covenant.

  2. A quick pre- view research view tonite after seeing this while watching Gong Show reruns (yes, that IS what I am ‘doing’ with my other mind) Keep digging! Do your own DD! (I hope formatting holds , some cut and paste) JA
    – Among 3000 largest companies in the country
    – Annuities and Life
    – Link to Investor Presentation:
    http://ir.american-equity.com/static-files/783b3a4c-d520-45d8-a138-848bd09920b1

    – S&PGR Affirms Ratings On American Equity: Outlook Stable
    2:35 pm ET August 15, 2019 (Dow Jones) Print
    S&PGR Affirms Ratings On American Equity; Outlook Stable
    (MORE TO FOLLOW) Dow Jones Newswires
    August 15, 2019 14:34 ET (18:34 GMT)
    Press Release: S&PGR Affirms Ratings On American Equity; Outlook Stable
    The following is a press release from S&P Global Ratings:

    — AEL has ‘A’ capital redundancy and a leading position in the fixed-indexed-annuity market, albeit a narrow business focus.
    — We are affirming our ratings on AEL and revising our view of the equity content of eight of AEL’s outstanding hybrid issuances to no equity from intermediate equity content.
    — The stable outlook reflects our belief that the company can maintain its leading FIA position amidst increasingly competitive conditions.
    NEW YORK (S&P Global Ratings) Aug. 15, 2019–, S&P Global Ratings said today it affirmed its ‘A-‘ financial strength and long-term issuer credit ratings on American Equity Investment Life Insurance Co. and its ‘BBB-‘ long-term issuer credit rating on holding company, American Equity Investment Life Holding Co.(collectively, AEL). The outlook is stable.
    – CEO has resigned, but will serve until replaced by Board.
    – 15 years of consistent rising annual dividends on common.
    – S&P affirmed ratings: (Source TD News feed)
    S&PGR Affirms Ratings On American Equity; Outlook Stable
    2:35 pm ET August 15, 2019 (Dow Jones) Print
    S&PGR Affirms Ratings On American Equity; Outlook Stable
    (MORE TO FOLLOW) Dow Jones Newswires
    August 15, 2019 14:34 ET (18:34 GMT)
    Press Release: S&PGR Affirms Ratings On American Equity; Outlook Stable
    The following is a press release from S&P Global Ratings:
    — AEL has ‘A’ capital redundancy and a leading position in the
    fixed-indexed-annuity market, albeit a narrow business focus.
    — We are affirming our ratings on AEL and revising our view of the
    equity content of eight of AEL’s outstanding hybrid issuances to no equity
    from intermediate equity content.
    — The stable outlook reflects our belief that the company can maintain
    its leading FIA position amidst increasingly competitive conditions.
    NEW YORK (S&P Global Ratings) Aug. 15, 2019–, S&P Global Ratings said today it affirmed its ‘A-‘ financial strength and long-term issuer credit ratings on American Equity Investment Life Insurance Co. and its ‘BBB-‘ long-term issuer credit rating on holding company, American Equity Investment Life Holding Co. (collectively, AEL). The outlook is stable.

  3. Subject to other folks providing their inputs on financials, I am also open to this one. In my hold portfolio, I have 3 BB+ floating rates purchased in the last 12 months. The float was 3.6+% above the LIBOR rate or 5-year treasury. I would expect a similar reset but it should be slightly higher. This would be a 5.4% – 5.5% reset in today’s rates. I would like a 6%+ coupon for the 1st 5 years. Thinking it will be closer to 5.75%, and at that, coupon, I may pass.

    Current Schwab rating on the common stock is a hold. Has been in business since 2003.

    1. Apparently they were founded in 1995. The stock quotes on Morningstar go back to 2003. I assume they became a public company at that point

  4. I used to sell their Equity index annuities.
    No one lost any money on the drop in equities in 2009, but the upside was limited when the market recovered. Their minimum guaranteed yield was 3% .
    After 2 years , i stopped selling that product.

    1. Fixed index annuities have changed a lot in the last few years. I have seen designs where you would be lucky to get 2% in 10% S&P 500 market. Low rates really hurt insurance companies.

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