Credit Suisse Starts American Equity Investment Life Holding (AEL) at Neutral
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Credit Suisse initiates coverage on American Equity Investment Life Holding (NYSE: AEL) with a Neutral rating and a price target of $20.00.
Analyst John Nadel commented, "American Equity Life is among the leaders in the growing indexed annuity market with market share between 8-14% over the past 5+ years. Annual growth in annuity account balances has averaged about 14% over the past decade, which has helped drive 13% average annual growth in operating income. AEL distributes its products primarily through an independent agency sales force although it has added a new channel more recently that focuses on distribution through banks and broker/dealers (Eagle Life). AEL shares are down 24% YTD, the worst in our coverage universe. Three key factors are contributing, in our view, including: 1) Department of Labor’s new fiduciary standard requires use of the Best Interest Contract Exemption, or “BICE,” for the sale of indexed annuities, which could significantly pressure sales particularly through retail agent distribution; 2) common equity issuance to raise new capital to support ongoing organic growth; and 3) continued downward pressure on long-term interest rates puts pressure on investment spreads, the primary driver of profit margins for fixed/indexed annuities."
Shares of American Equity Investment Life Holding closed at $18.02 yesterday.
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