A full service underwriter of fixed annuity and life insurance products, American Equity Investment Life Holding Company (AEL) is offering 6.625% senior unsecured notes worth $400 million with maturity scheduled on Jul 15, 2021. The company announced its intention to relaunch the notes on Jul 11, 2013. Previously, the notes were worth an aggregate amount of $250 million.
The proceeds from the issuance will be used to purchase the 5.25% contingent convertible senior notes maturing in 2029 and the 3.5% convertible notes maturing in 2015. In addition, American Equity Investment Life Holding Company also intends to use the proceeds to pay off the outstanding amounts under its existing revolving credit facility and related fees and expenses.
As of Mar 31, 2013, the debt-to-capital ratio for the company was 0.15x which was almost in line with the ratio at year end 2012. However, the current issuance of $400 million is expected to increase the debt-to-capital ratio going forward.
American Equity Investment Life Holding Company’s interest expense on notes payable in the first quarter of 2013 increased 3.6% year over year to $7.2 million. The new notes issued are expected to increase the interest expense of the company further. Nevertheless, the company’s solid operational performance generates enough funds to service the debt uninterruptedly.
American equity Investment Life Holding Company is expected to release its second-quarter 2013 earnings results on Jul 31, 2013. The Zacks Consensus Estimate for the second quarter is currently pegged at 45 cents translating into year-over-year improvement of 3.5%.
American Equity Investment Life Holding Company carries a Zacks Rank #3 (Hold). Other insurers like StanCorp Financial Group Inc. (SFG) carries a favorable Zacks Rank #1 (Strong Buy) while China Life Insurance Co. Ltd. (LFC) and Genworth Financial Inc. (GNW) carry a Zacks Rank #2 (Buy) and appear impressive.
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