‘Business as usual’ if Brookfield Reinsurance acquires American Equity

Brookfield Reinsurance announced details this morning of its offer to acquire partner American Equity, a major seller of fixed annuities.

Brookfield Reinsurance wants to buy all the American Equity shares it doesn’t already own for $55 apiece, according to a statement. Several suitors attempted to acquire American Equity in recent years, including a takeover bid that led to a partnership with Brookfield.

It appears that the Brookfield offer is well above previous offers. It represents a 35% premium on American Equity’s closing price on Friday, Brookfield noted. American Equity stock shot up upon the takeover news being first reported by Bloomberg on Monday. As of midday Tuesday, American Equity stock traded at $53 a share, up more than 30% from Monday's opening price.

American Equity’s board will review the proposal with advisors. In a separate statement, Brookfield said it’s aiming to negotiate terms of a definitive agreement and announce a transaction by June 30. The bid includes $38.85 per share in cash plus $16.15 per share in class A stock of Brookfield Asset Management Ltd.

"Business as usual," said Sheryl Moore, CEO of Wink Inc and Moore Market Intelligence, of the impact of a Brookfield acquisition.

The Des Moines, Iowa-based American Equity is a big player in the fixed indexed annuity market.

American Equity sold $964 million worth of fixed indexed annuities in Q1, an increase of 23.2% and 9.3% compared to fourth and first quarters of 2022, respectively. Overall annuity sales totaled $1.4 billion.

Brookfield confirmed "business as usual" with its statement.

"Consistent with the AEL 2.0 strategy, Brookfield Reinsurance will continue to focus on meeting the needs of AEL policyholders and clients while delivering high quality customer service," it reads. "Brookfield Reinsurance intends to continue AEL’s focus on alternative asset strategies and expects BAM will manage a significant portion of AEL’s assets. As a result, AEL will gain access to BAM’s leading direct origination platforms and asset management capabilities while maintaining its current high-quality bias and investment grade focus."

In 2020, American Equity rolled out a strategy dubbed “AEL 2.0” to boost shareholder returns by contracting investment management out to multiple managers with specialist expertise.

Contentious relationship

American Equity has been the subject of several takeover rumors and attempts. The first takeover bid, by MassMutual and Athene in 2020, was thwarted when Brookfield came to the rescue with a large investment infusion.

Brookfield Reinsurance is the biggest shareholder in American Equity with a roughly 20% stake, according to regulatory filings.

In the years since, however, the relationship between Brookfield and American Equity deteriorated into public disputes.

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.

There has been little mention of the dispute in earnings calls since.

If the deal is closed, Brookfield Reinsurance will increase its assets under management to approximately $100 billion, and BAM will increase its overall AUM to approximately $900 billion through its asset management, wealth and insurance subsidiaries, the statement said.

Senior Editor John Hilton 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.

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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 john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.