American Equity Investment Life Holding Co.

The stable outlook reflects our expectation that AEL will continue to operate in its core FIA market and keep its satisfactory business risk profile. We expect AEL to maintain capital redundancy at the 'A' level, financial leverage below 30%, and fixed-charge coverage above 6x. We could lower our ratings in the next 12-24 months if AEL's capital adequacy drops below the 'A' confidence level for a sustained period. We may also lower the ratings if sales decline compared with top FIA players for a prolonged period, further eroding AEL's competitive position; operating performance declines relative to peers; and fixed-charge coverage drops below 4x. We are unlikely to raise our ratings, even if capitalization improves to the 'AA' level, given the

...S&P Global Ratings expects American Equity Investment Life Insurance Co. and holding company American Equity Life Holding Co. (together, AEL) to maintain a strong market presence in the U.S. fixed-index annuity (FIA) market. AEL remains a leading player in the FIA market, as demonstrated by its top 10 sales position across U.S. fixed annuities, according to LIMRA, as of second-quarter 2020. We expect sales and distribution to remain pressured amid entirely virtual sales during the COVID-19 pandemic, in addition to aggressive competition coupled with spread compression amid near-zero interest rates. Business diversity continues to limit AEL's competitive position. AEL's business model primarily focuses on growing the presence of its core fixed-index and fixed annuity products. AEL relies on independent agents via national marketing organizations, and to a lesser extent banks and broker-dealers, for its current distribution strategy. The company's FIA focus limits its business diversity and...

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