American Equity readies 2022 earnings report amid ongoing conflicts

American Equity reports fourth quarter numbers in two weeks. — Brookfield is in a dispute with American Equity over its strategic plan.

By John Hilton

American Equity is one of the more anticipated earnings reports this month, with the fixed indexed annuity seller fighting off all comers. For now.

The West Des Moines, Iowa, insurer remains an attractive takeover target after fending off a several takeover bids in three years. AEL rejected a recent offer from Prosperity Group to acquire the company for $45 per share in cash, according to several reports.

The first takeover bid, by MassMutual and Athene in 2020, was thwarted when Brookfield Asset Management Re came to the rescue with a large investment infusion. Based in Toronto, Brookfield is now American Equity's largest shareholder with an 18.5% stake.

But things have soured between the two companies. During American Equity third-quarter earnings call with analysts, CEO Anant Bhalla was caught off-guard by the surprise resignation of Sachin Shah from American Equity’s board. Shah represented Brookfield and said in his resignation letter that the reinsurer had lost faith in American Equity’s strategic direction and demanded the sale of BAM Re’s 9,106,042 shares.

Since then, the Department of Justice opened an investigation into Brookfield for potential antitrust law violations. Brookfield purchased American National in May. That insurer sells life, health and property and casualty insurance and annuities. According to a January filing with the Securities and Exchange Commission, the DOJ is investigating whether Brookfield violated a federal antitrust law that bans companies from holding board seats on specific competitors.

A Brookfield spokesperson sent the following statement to InsuranceNewsNet: “We recognize the DOJ’s interest in Section 8 of the Clayton Act and are cooperating fully with this request, which has become routine across the industry. We are confident that we have been in full compliance with Section 8, and in an abundance of caution, do not currently have a director on the AEL Board.”

The source of the Brookfield rift with American Equity can be traced to the latter's September investment in 26North Partners, a new private equity firm launched by Apollo Global Management co-founder Josh Harris.

Who alerted the Feds?

Meanwhile, how and why the DOJ came to probe Brookfield remains an intriguing question. According to reporting by the Des Moines Register, American Equity declined comment on whether it asked the DOJ to investigate Brookfield.

American Equity stock continues to climb amid the insurer's ongoing battles. Since its Nov. 8 earnings call, AE shares are up nearly 50%, likely boosted by takeover rumors.

In a Jan. 15 assessment, Seeking Alpha rated AE as "a strong buy" due to its acquisition potential as well as the market for its products. American Equity "offers annuities which are likely to gain attention in the bear market of 2023," the column noted.

In calls with analysts and investors, Bhalla insists that American Equity remains on track with its AE 2.0 strategy, a growth plan that the carrier unveiled in 2020.

In the third quarter 2022, AE reported a significant drop in sales of fixed indexed annuities, its core products. Sales of $730 million in the third represented a 20% drop from the year-ago quarter’s sales of $915 million.

Bhalla said the company took its foot off the gas to position itself better in the future but added that the company would be offering better rates starting in November 2022.

American Equity reports fourth-quarter 2022 and full-year results after the close of the market Feb. 16. An earnings call with analysts is scheduled for the following morning.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.