Brookfield touts future ability to reel in $15-$20B annually from insurance

Brookfield Asset Management announced a blockbuster deal to acquire annuity seller American Equity Investment Life (AEL) more than seven months ago – a deal that has yet to officially close.

That doesn't mean that BAM executives are not making big plans for the insurance assets it will control in the near future.

"Brookfield will become one of the largest writers of annuities in the United States," BAM President Connor Teskey told Wall Street analysts on a conference call today. "We expect to meaningfully grow AEL's pace of annuity underwriting and, over time, we should be able to organically raise $15 to $20 billion dollars of insurance capital annually."

Brookfield posted distributable earnings of $586 million in the fourth quarter. The Toronto-based firm ended the year with $457 billion of fee-bearing assets, up 4% from Q3. The firm has a stated goal of reaching $1 trillion by 2028.

BAM reported net income of $95 million for the quarter. BAM owns a 25% interest in Brookfield's asset management business with the other 75% owned by Brookfield Corp.

"We had strong performance in our first year following our listing," Teskey said. "We raised $93 billion of capital which, combined with the approximately $50 billion anticipated upon the closing of the [AEL] insurance account, brings the total to $143 billion. With interest rates stabilizing and significant dry powder available, we expect a very active period of transaction activity in the coming year, with valuations for real assets responding accordingly.”

Right on schedule

Responding to a question, Teskey said there are no issues holding up the AEL deal from closing. Brookfield, which took a 20% stake in AEL in 2020, bought all of the outstanding shares of the insurer in a cash and stock transaction in a $4.3 billion deal announced in late June.

"In November, we received overwhelming support from the AEL shareholders," Teskey said. "We continue to work through the regulatory process and we continue to target closing shortly."

American Equity ranked 11th in the most-recent LIMRA fixed annuity sales rankings with $5.6 billion in the third quarter.

Brookfield acquired American National, headquartered in Galveston, Texas, in a $5.1 billion deal that officially closed in May 2022. Operating in all 50 states and Puerto Rico, American National affiliates underwrites and issues life, health, and property and casualty insurance and annuities.

The experience and assets gained through the American National and Oaktree acquisitions will help Brookfield manage the AEL balance sheet and maximize its insurance capabilities, Teskey explained. In 2019, BAM acquired 62% of Oaktree Capital Management in a roughly $4.8 billion deal.

Oaktree is "one of the largest and broadest credit franchises in the world," Teskey said, and credit is "a key asset class to service insurance."

“We feel that we are extremely well positioned today and will only go from strength to strength in that regard,” he added. “We really feel we have a product suite that is relatively unmatched in terms of servicing those clients. All that being said, there's room to run.”

More Brookfield acquisitions?

BAM executives didn't rule out further merger-and-acquisition activity. The company starts the year "with more than $100 billion in dry powder," BAM CEO Bruce Flatt said, "despite investing more than $50 billion last year, one of our most active years of investing. We believe the environment will lead to continued consolidation in the industry.

"We continue to look at strategic opportunities to broaden and strengthen our franchise."

Meanwhile, Brookfield Corp. is experiencing financial setbacks in a sagging commercial real estate market. The Wall Street Journal reported in May on missed payments for high-profile, multi-million-dollar office properties.

Teskey acknowledged what he termed "stress in certain portions of the real estate market." But "high-quality" assets are performing very well, he noted.

"While that temporary stress is a reality for some, it's also an opportunity for others," Teskey said. "With the breadth of our real estate franchise and how we fund our businesses, we're in a great position to ride through this environment and continue to keep refinancing our businesses."

BAM recently announced plans to raise more than $25 billion for two new private funds investing in clean energy. The firm said this week that it has taken in $10 billion for its latest energy transition fund.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.