American Equity Investment Life Holding Company Announces New Preferred

American Equity Investment Life Holding Company (AEL) has announced the issuance of a new fixed-rate reset non-cumulative preferred stock. A fixed-rate reset issue will be fixed for about 5 years and then be reset every 5 years to a new coupon determined by the ‘spread’ which is added to the 5 year treasury.

The issue will be non investment grade—BB by S&P.

The company currently has a 5.95% issue already outstanding and it is a fixed-rate reset preferred and has traded weakly – now at $22.27. This issue has a weak reset rate of 4.322% which when added to the 5 year treasury (around .47%) is around 4.80%–this new issue will need to be better.

The key to the attractiveness is what the ‘spread’ will be when the issue reaches the reset period.

You can find the information on the currently outstanding issue here.

The preliminary prospectus for the new issue can be found here.

mcg was right on it-as always.

4 thoughts on “American Equity Investment Life Holding Company Announces New Preferred”

  1. The first issue has traded weakly and a BB rating for an insurer is nothing to brag about.

    If you own the first issue I suspect this may a good trading opportunity (better spread for sure) but otherwise I’m yawning.

  2. At its lowest point AEL-A traded as low as $10 intraday, it has had a remarkable come back to make it all the way to $22plus/shr. This new issue seems to offer little incentive to buy it with such a weak reset rate. And beyond the technicalities of this offering, the big issue for me is: how will insurance companies make money in this environment? Their investment portfolios will yield next to nothing, so the only other option is to jack up the premiums on the policies they sell you. Seems like a bad business to be in at the moment, I’m staying away.

  3. My experiences with resets the adjustment being higher is a given. The methodology appears pretty standard. Underwriters find the “market yield” it takes to send off, back out current 5 yr yield and that becomes your spread. Its really beneficial to buy in low treasury higher spread times. When CAD issues were first instituted the 5 year was a lot higher. This is how a reset from TC Energy has issued a lowly 1.15% or so spread…And of course now why it trades under $10 CAD despite being investment grade. I have less than no opinion on this issue since I know even less about the company than my opinion.

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