The Canadian firm will also acquire a stake of nearly 20% in American Equity
Brookfield Asset Management has agreed to reinsure up to $10bn of the fixed index annuity liabilities of American Equity Investment Life (AEL) besides acquiring a stake of 19.9% in the latter.
As per the terms of the deal, the Canadian asset management company will acquire the stake in two stages. Initially, it will acquire a 9.9% stake at $37.00 per share in the US retirement planning annuity provider.
In the second stage, Brookfield will acquire the remaining 10% stake at either $37.00 per share or adjusted book value per share, depending on whichever is greater.
The second equity investment will be subject to finalisation of certain terms of the reinsurance agreement, relevant regulatory approvals, and other closing conditions. Following these, the equity deal is anticipated to close in the first half of next year.
Under the reinsurance partnership, Brookfield will reinsure $5bn of American Equity’s existing liabilities and up to an additional $5bn of new sales of its IncomeShield or similar fixed index annuity products when written.
American Equity president and CEO Anant Bhalla said: “This compelling strategic transaction, which we have been discussing with Brookfield since March, demonstrates the substantial shareholder value we are creating through execution of our AEL 2.0 strategy.
“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.”
The reinsurance deal will be executed by the Canadian firm’s subsidiary Brookfield Asset Management Partners.
Brookfield chief investment officer Sachin Shah said: “This transaction represents a meaningful investment for us in the attractive U.S. 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.”
American Equity rejects offer from Athene and MassMutual
American Equity also announced the rejection of an offer of $36.00 per share in cash received earlier this month from Athene and Massachusetts Mutual Life Insurance (MassMutual). The company said that the offer considerably undervalued it, besides not being in its best interests, of its shareholders, and also other stakeholders.