Brookfield Re reports more than $2B in annuity sales in Q3

Brookfield Reinsurance announced financial results for the quarter ended September 30, 2023.

Sachin Shah, CEO of Brookfield Reinsurance, stated, “Our strong results for the third quarter reflect the continued build out of our operating platform and increased investment returns. As our business grows to $100 billion in assets in the near term, we are focused on further scaling across our core business lines, managing risk and driving investment yields and returns to our shareholders.”

^{1.   As at January 1, 2023, Brookfield Reinsurance converted its accounting framework from IFRS to US GAAP. The conversion is applied retrospectively and prior period figures have been restated where applicable.
2.   See Non-GAAP and Performance Measures on page 7 and a reconciliation from net income and reconciliation from equity on page 6.
3.   Class A and Class B shares receive distributions at the same amount per share as the cash dividends paid on each Brookfield Class A Share. Following the spin-off of Brookfield’s Asset Management business in December 2022, combined, Brookfield Corporation’s quarterly distribution of $0.07 per share and Brookfield Asset Management’s quarterly dividend of $0.32 per share (equivalent to $0.08 per Class A share held prior to the special distribution), would equate to $0.15 per Class A share held prior to the special distribution; representing a 7% increase from the prior year distribution.}

Third Quarter Highlights

• Originated over $2 billion of annuity sales, including approximately $760 million of flow business within our existing reinsurance treaties

• Closed 16 pension risk transfer (“PRT”) transactions, representing over $250 million in premiums

• Deployed approximately $1 billion at returns in excess of 9%, increasing our gross portfolio wide yield to 5.5%

• Significantly progressed the closing of our previously announced acquisitions of American Equity Investment Life Holding Company (“AEL”) and Argo Group International Holdings, Ltd. (“Argo Group”)

Operating Update

We recognized $182 million and $487 million of distributable operating earnings (“DOE”) for the three and nine months ended September 30, 2023, respectively, compared to $159 million and $218 million in the prior year periods. The increase in results in the three month period was driven by higher net investment income given the significant progress made over the last twelve months repositioning assets into higher yielding investment strategies. We continue to benefit from maintaining a short duration asset portfolio in the current rising interest rate environment and currently holding $7 billion of cash and short-term treasuries. The increase in results in the nine month period also benefited from our asset repositioning efforts, as well as from contributions from American National, which was acquired in May 2022.

We recorded net income of $77 million (2022 - net income of $139 million) for the three months ended   September 30, 2023, as a result of contributions from our DOE, less unrealized mark-to-market losses on our equity investments and insurance reserves.

Today we are in a strong liquidity position within our corporate and subsidiaries’ investment portfolios, with approximately $22 billion of liquidity. Our upcoming acquisitions will further bolster our liquidity with additional cash and short-term liquid securities, together facilitating the rotation into higher yielding investment strategies and provide sufficient liquidity coverage for stress liability scenarios.

Update on Growth Initiatives

Our previously announced acquisition of Argo Group, a leading U.S. specialty property and casualty (“P&C”) platform, is expected to close before the end of the year and our acquisition of AEL is progressing well and on track to close in early 2024. During the quarter, Brookfield Corporation (“Brookfield”) contributed $2.1 billion of real estate and other assets into BNRE in exchange for Class C shares, to support the growth of the business.

Upon closing of the Argo Group and AEL transactions, we will have over $100 billion of assets across a diversified platform of life, annuities and P&C. With the strong, complementary distribution channels between the companies and our existing platform, we have a credible path to meaningfully grow our insurance assets organically, and by leveraging Brookfield’s investment capabilities, these assets will be redeployed at attractive risk-adjusted returns, driving increased spread earnings and delivering significant returns to our shareholders.

Brookfield Reinsurance Exchange Offer

On October 13, 2023, Brookfield Reinsurance formally commenced its previously announced offer (the “Offer”) whereby holders of Class A Limited Voting Shares (“BN Shares”) of Brookfield Corporation (NYSE, TSX: BN) have the opportunity to voluntarily exchange up to 40,000,000 BN Shares for newly-issued Brookfield Reinsurance Shares on a one-for-one basis.

Both Brookfield Reinsurance and Brookfield Corporation believe that exchanges under the Offer by holders whose personal circumstances favor investing in the paired entity through the ownership of Brookfield Reinsurance Shares will be beneficial to overall Brookfield; however, individual shareholders of Brookfield Corporation will need to make their own decision whether to tender shares in the contemplated Offer and it is entirely voluntary.

As a reminder, the Offer is expected to expire at 5:00 p.m. (Eastern time) on November 13, 2023.

Regular Distribution Declaration

The Board declared a quarterly distribution of $0.07 per Class A and B share, payable on December 29, 2023 to shareholders of record as at the close of business on December 14, 2023. This distribution is identical in amount per share and has the same payment date as the quarterly distribution announced today by Brookfield on its Class A limited voting shares (“Brookfield Class A Shares”).

Brookfield Corporation Operating Results

An investment in Class A Shares of our company is intended to be, as nearly as practicable, functionally and economically, equivalent to an investment in the Brookfield Class A Shares. A summary of Brookfield’s third quarter and last twelve months operating results is provided below:

^{1.   Distributable earnings before realizations, including per share amounts, for the three months ended September 30, 2022 and the twelve months ended September 30, 2023 and 2022 were adjusted for the special distribution of 25% of Brookfield’s asset management business on December 9, 2022.}

Brookfield Corporation net income above is presented under IFRS. Given the economic equivalence, we expect that the market price of the Class A Shares of our company will be impacted significantly by the market price of the Brookfield Class A Shares and the business performance of Brookfield as a whole. In addition to carefully considering the disclosure made in this news release in its entirety, shareholders are strongly encouraged to carefully review Brookfield’s letter to shareholders, supplemental information and its other continuous disclosure filings. Investors, analysts and other interested parties can access Brookfield’s disclosure on Brookfield’s website under the Reports & Filings section at bn.brookfield.com.

CONSOLIDATED BALANCE SHEETS

^{1.   December 31, 2022 figures reflect adjustments related to the conversion of accounting framework from IFRS to US GAAP and the adoption of Long Duration Targeted Improvements issued by the FASB, effective January 1, 2023, applied retrospectively.}

CONSOLIDATED STATEMENTS OF OPERATIONS

^{1.   Three and nine months ended September 30, 2022 figures reflect adjustments related to the conversion of accounting framework from IFRS to US GAAP and the adoption of Long Duration Targeted Improvements issued by the FASB, effective January 1, 2023, applied retrospectively.
2.   Class A shares receive distributions at the same amount per share as the cash dividends paid on each Brookfield Class A Share.}

SUMMARIZED FINANCIAL RESULTS

RECONCILIATION OF NET INCOME TO DISTRIBUTABLE OPERATING EARNINGS

RECONCILIATION OF EQUITY TO ADJUSTED EQUITY

^{1.   Non-GAAP measure - see Non-GAAP and Performance Measures on page 7.}

Additional Information
Brookfield Reinsurance was established on December 10, 2020 by Brookfield and on June 28, 2021 Brookfield completed the spin-off of the company, which was effected by way of a special dividend, to holders of Brookfield's Class A and B Shares. On January 1, 2023, Brookfield Reinsurance converted its accounting framework from International Financial Reporting Standards (“IFRS”) to generally accepted accounting principals in the United States of America (“US GAAP” or “GAAP”). The company’s conversion to US GAAP services to provide more comparable financial information to the other insurance companies in the markets it operates in, as well as more useful financial information and to its counterparties, investors and other stakeholders. The statements contained herein are based primarily on information that has been extracted from our financial statements for the quarter ended September 30, 2023, which have been prepared using US GAAP.

Brookfield Reinsurance’s Board of Directors have reviewed and approved this document, including the summarized unaudited consolidated financial statements prior to its release.

Information on our distributions can be found on our website under Stock & Distributions/Distribution History.

Brookfield Reinsurance Ltd. (NYSE, TSX: BNRE) operates a leading capital solutions business providing insurance and reinsurance services to individuals and institutions. Each class A exchangeable limited voting share of Brookfield Reinsurance is exchangeable on a one-for-one basis with a class A limited voting share of Brookfield Corporation. (NYSE/TSX: BN). For more information, please visit our website at bnre.brookfield.com.