American Equity Investment Life Holding Company (AEL) has finalised a strategic partnership with Brookfield Asset Management after turning down a proposed $3bn takeover from Athene Holding and Massachusetts Mutual Life Insurance Co.
As part of the agreement, Brookfield will become a 19.9% cornerstone investor and reinsurance counterparty of AEL.
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The company will initially buy a 9.9% interest at $37.00 per share, subject to regulatory approval.
It will then purchase an incremental 10.0% interest, at the greater value of $37 per share or adjusted book value per share.
The second equity investment is subject to finalisation of certain reinsurance agreement terms, receipt of applicable regulatory approvals and other closing conditions. It is expected to close in the first half of next year.
AEL sells fixed index annuities through independent agents, banks, and broker dealers. Its investment products tailored to preserve retirement fund of the clients and offer them a secure, predictable income.
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By GlobalDataFollowing the initial investment, Brookfield will receive one seat on American Equity’s board of directors.
Furthermore, this transaction is expected to provide Brookfield’s reinsurance and annuity subsidiary, Brookfield Asset Management Partners with a prospect to reinsure up to $10bn in annuity liabilities.
This is said to includes an initial $5bn of current liabilities and up to an incremental $5bn of future business when written.
Brookfield’s chief investment officer Sachin Shah said: “We are pleased to be investing in American Equity and to partner with the business in reinsurance as it grows its leading position as a retirement planning annuity provider.
“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 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.
“This partnership accelerates the transformation of our business toward a ROA model from our historical focus on ROE, unlocks significant new investment opportunities, and enables us to deliver significant value to our shareholders and policyholders.”
The new development will provide AEL with access to Brookfield’s alternative asset strategies, which is expected to help the firm to deliver sustained returns in a low interest rate environment.
Last year, Brookfield concluded the buyout of majority stake in Genworth Canada for $1.8bn.
