The U.S. Securities and Exchange Commission (SEC) is unlikely to return to the indexed annuity issue within the next 18 months.
Standard & Poor’s Ratings Services (S&P), New York, gives that assessment in an announcement that the rating agency will changing its outlook on American Equity Investment Life Holding Company, Des Moines, Iowa (NYSE:AEL, to stable, from negative.
American Equity is a major player in the indexed annuity market.
The District of Columbia U.S. Court of Appeals recently vacated Rule 151A, an SEC regulation that could have classified indexed annuities as securities and put them under SEC jurisdiction.
President Obama then signed H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act bill, and the new act contains a provision that forbids the SEC from claiming jurisdiction over indexed annuities and other life and annuity products provided through an insurer’s general account, rather than through separate accounts, if the products meet nonforfeiture requirements.
Before the court ruled and the Dodd-Frank act became law, Rule 151A was set to take effect in January 2011.
“We don’t expect the SEC to revisit 151A within the next 18 to 24 months,” S&P says in a comment on the decision to change the outlook on American Equity.
S&P also affirmed the BB plus counterparty credit rating it has assigned the holding company and the BBB plus counterparty credit rating and financial strength rating it has assigned the company’s American Equity Investment Life Insurance Company subsidiary.
“Over the ratings outlook horizon, we believe it is unlikely that the SEC will resume substantial efforts to classify indexed annuities as securities, which is a prerequisite to bringing them within the SEC’s regulatory authority,” Kevin Maher, an S&SP analyst, says in a statement.
American Equity takes an “aggressive” approach managing the amount of assets backing liabilities but the company has shown strong growth, good operating performance and access to the capital markets, S&P says.