The Canadian firm will also reinsure $10 billion of the Iowa-headquartered firm's fixed index annuity liabilities
Brookfield Asset Management is making a significant investment in a US annuities firm.
A strategic partnership was announced Sunday by American Equity, which has rejected an unsolicited takeover bid by Athene Holding and Massachusetts Mutual, which it says was “opportunistic” and “significantly undervalues the company.”
The deal with Brookfield sees the Canadian investment firm take a 19.9% stake in American Equity with the share purchase split between an initial $37 per share transaction followed by a variable price second instalment of at least $37 per share. It will receive a place on the American Equity board.
The partnership provides American Equity with unique access to Brookfield’s attractive, higher-returning alternative asset strategies, which position American Equity to generate sustained returns in a low interest rate environment.
“By partnering with a world-class asset management and investment firm like Brookfield, we are accelerating the implementation of our strategy to be the leading, customer-focused annuity provider with best-in-class capabilities across the entire insurance value chain, from distribution to asset management,” said Anant Bhalla, president and CEO of American Equity.
American Equity is in transition from a historical focus on return on equity to return on assets and says this deal will accelerate that aim, while releasing capital available for share repurchases, organic growth, and strategic initiatives.
Brookfield has agreed not to transfer any common shares purchased in the equity investment for a period of two years after the applicable closing of the investment, as well as to customary standstill restrictions until the five-year anniversary of the initial equity investment, in each case, subject to certain exceptions.
$10 billion reinsurance
As well as the investment, Brookfield has agreed to reinsure $5 billion of existing liabilities and up to an incremental $5 billion of new sales of American Equity’s IncomeShield or similar fixed index annuity products.
“We are pleased to be investing in AEL and to partner with the business in reinsurance as it grows its leading position as a retirement planning annuity provider,” said Sachin Shah, Brookfield’s Chief Investment Officer. “This transaction represents a meaningful investment for us in the attractive US insurance market and we believe our alternative asset strategies can deliver long-term value to the company. We look forward to supporting American Equity in advancing its AEL 2.0 strategy which is well-positioned to create value for all stakeholders.”
