UNAUDITED PRO FORMA FINANCIAL STATEMENTS – Form 6-K

The Company acquired a 100% interest in American National for total cash consideration of $5.1 billion. American National offers a broad portfolio of insurance products, including individual and group life insurance, annuities, health insurance, and property and casualty insurance. The Company acquired control of American National on May 25, 2022 and funded the acquisition through the issuance of $3.6 billion of junior preferred shares and class C shares to Brookfield Corporation and $1.5 billion of term loans issued to a consortium of external lenders.

In the first half of 2023, the Company acquired interests in a portfolio of core office and mixed-use real estate properties ("Real Estate Assets") which are accounted for as equity method investments. The properties are office and mixed-use commercial properties that provide stable operating income to the Company's insurance portfolio. Total fair value of the consideration transferred in relation to the portfolio of assets acquired was approximately $800 million, and was funded with cash on hand available to the Company.

On November 16, 2023, the Company completed the acquisition of 100% interest in Argo for total cash consideration of $1.1 billion. Argo is a U.S. focused underwriter of specialty insurance products in the property and casualty market. The Company has funded the transaction with existing cash on hand available to the Company.

The Company is expected to acquire all of the outstanding shares of common stock of AEL it does not already own for total expected consideration of $3.4 billion, which values AEL at $4.3 billion. AEL is a U.S. based insurance company, specializing in the development and sale of annuity and life insurance products. The Company is expected to fund the transaction with cash on hand available to the Company, class A limited voting shares of Brookfield Asset Management Ltd. ("BAM"), and $350 million of debt financing.

the audited financial statements of the Company as at December 31, 2022 and 2021 and for each of the years in the three years ended December 31, 2022, and the unaudited interim financial statements of the Company as at June 30, 2023 and December 31, 2022 and for the three and six months ended June 30, 2023 and 2022;

the audited combined statement of revenues and certain operating expenses of the Real Estate Assets for the year ended December 31, 2022, and the unaudited combined statement of revenues and certain operating expenses for the six months ended June 30, 2023;

the audited financial statements of American National as of December 31, 2021 and 2020 and for each of the years in the two year period ended December 31, 2021, and the unaudited interim financial statements of American National as of June 30, 2022 and December 31, 2021 and for the six months ended June 30, 2022 and 2021;

the audited financial statements of Argo as at December 31, 2022 and 2021 and for each of the years in the three years ended December 31, 2022, and the unaudited interim financial statements of Argo as at June 30, 2023 and December 31, 2022 and for the three and six months ended June 30, 2023 and 2022; and

the audited financial statements of AEL as at December 31, 2022 and 2021 and for each of the years in the three years ended December 31, 2022, and the unaudited interim financial statements of AEL as at June 30, 2023 and December 31, 2022 and for the three and six months ended June 30, 2023 and 2022, as well as

the accompanying notes to such financial statements.

As at June 30, 2023

In USD, millions

Assets

Available-for-sale fixed maturity securities, at fair value

Equity securities, at fair value

Mortgage loans on real estate

Real estate and real estate partnerships

Investment funds

Policy loans, net

Private loans

Short term investments

Other invested assets, net

Total investments

Cash and cash equivalents

Accrued investment income

Deferred policy acquisition costs

Coinsurance deposits

Reinsurance funds withheld

Premiums due and other receivables

Ceded unearned premiums

Deferred tax asset

Reinsurance recoverables, net

Property and equipment

Goodwill, VOBA and intangible assets

Other assets

Separate account assets

Total assets

Liabilities

Future policy benefits

Policyholders' account balances

Policy and contract claims

Deposit liabilities

Market risk benefit

Unearned premium reserve

Due to related parties

Other policyholder funds

Notes payable

Corporate borrowings

Subsidiary borrowings

Liabilities issued to reinsurance entities

Other liabilities

Separate account liabilities

Total liabilities

Junior preferred shares

Equity

Class A exchangeable, Class B, and Class C (10,450,952 class A exchangeable shares, 24,000 class B shares; par value $33.56 per share and 41,314,891 class C shares issued and outstanding; par value $1 per share)

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income (loss), net of taxes

Non-controlling interests

Total equity

Total liabilities and equity

For the six months ended June 30, 2023

In USD, millions (except per share

amounts)

Net premiums

Other policy revenue

Net investment income

Investment related gains (losses), net

Net investment results from funds withheld

Total revenues

Policyholder benefits and claims incurred

Interest sensitive contract benefits

Commissions for acquiring and servicing policies

Net change in deferred policy acquisition costs

Change in fair value of market risk benefit

Change in fair value of embedded derivatives

Other reinsurance expenses

Operating expenses

Interest expense

Total benefits and expenses

Net income (loss) before income taxes

Income tax recovery (expense)

Net income (loss) for the period

Attributable to:

Class A exchangeable and Class B shareholders

Class C shareholders

Non-controlling interests

Net income (loss) per class C share

Basic

For the year ended December 31, 2022

In USD, millions

Net premiums

Other policy revenue

Net investment income

Investment related gains (losses), net

Net investment results from funds withheld

Total revenues

Claims and policyholder benefits

Interest sensitive contract benefits

Commissions for acquiring and servicing policies

Net change in deferred policy acquisition costs

Change in fair value of market risk benefit

Change in fair value of embedded derivatives

Operating expenses

Other reinsurance expenses

Interest expense

Impairment of intangible assets and goodwill

Total benefits and expenses

Net income (loss) before income taxes

Income tax recovery (expense)

Net income (loss) for the period

Attributable to:

Class A exchangeable and Class B shareholders

Class C shareholders

Non-controlling interests

Net income (loss) for the period

Net income (loss) per class C share

Basic

Real Estate Assets

The Company's consolidated statement of operating results for the six months ended June 30, 2023 has been adjusted to reflect $9 million for the Company's share of the Real Estate Assets' results from January 1, 2023 to the date of the acquisitions.

The Company's consolidated statement of operating results for the year ended December 31, 2022 has been adjusted to $5 million for the Company's share of the Real Estate Assets' results for the year ended December 31, 2022.

Argo - June 30, 2023

As at June 30, 2023

In USD, millions

Assets

Investments:

Fixed maturities available-for-sale, at fair value

Available-for-sale fixed maturity securities, at fair value

Commercial mortgage loan

Mortgage loans on real estate

Equity securities, at fair value

Investment funds

Other investments

Other invested assets, net

Short term investments, at fair value

Short term investments

Total investments

Cash

Accrued investment income

Premiums due and other receivables

Premiums receivable

Reinsurance recoverables, net

Reinsurance recoverables

Goodwill

Current income taxes receivable, net

Deferred tax asset, net

Deferred acquisition costs, net

Ceded unearned premiums

Operating lease right-of-use assets

Goodwill, VOBA and intangible assets

Other assets

Total assets

Liabilities and shareholders' equity

Policy and contract claims

Reserves for losses and loss adjustment expenses

Unearned premiums

Accrued underwriting expenses and other liabilities

Reinsurance payable

Ceded reinsurance payable, net

Funds held

Subsidiary borrowings

Senior unsecured fixed rate notes

Junior subordinated debentures

Other liabilities

Operating lease liabilities

Total liabilities

Shareholders' equity:

Preferred shares and additional paid-in capital

Common shares

Additional paid-in capital

Treasury shares

Retained earnings

Accumulated other comprehensive loss, net of taxes

Non-controlling interests

Total shareholders' equity

Total liabilities and shareholders' equity

For the six months ended June 30, 2023

In USD, millions

Premiums and other revenue:

Earned premiums

Net premiums

Net investment income

Investment related gains (losses), net

Net realized investment and other gains (losses)

Change in fair value recognized

Change in allowance for credit losses on fixed maturity securities

Total net investment and other gains (losses)

Total revenue

Expenses:

Losses and loss adjustment expenses

Claims and policyholder benefits

Underwriting, acquisition and insurance

Commissions for acquiring and servicing policies

Non-operating expenses

Operating expenses

Interest expense

Fee and other income (expense), net

Foreign currency exchange gains (losses)

Total expenses

Income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

Dividends on preferred shares

Net income (loss) attributable to common

Attributable to:

Class A exchangeable and Class B shareholders

Class C shareholders

Non-controlling interests

The historical financial statements of Argo are prepared in accordance with U.S. GAAP. The Company has reviewed and determined that there are no material differences in accounting policies applied by Argo and the Company.

Certain reclassification adjustments have been recorded to conform Argo's financial statement presentation to the presentation used by the Company.

The Argo acquisition is accounted for using the acquisition method under ASC 805 Business Combinations with the Company being identified as the acquirer. The pro forma adjustments in the Unaudited Pro Forma Statement of Financial Position record the use of $1.1 billion of cash on hand at the Company in exchange for the net assets of Argo. The following table summarizes, on a preliminary basis, the expected cash consideration transferred, the fair value of assets acquired and liabilities assumed at the acquisition date, and any resulting goodwill:

Consideration transferred

Cash & cash equivalents

Investments

Accrued investment income

Value of business acquired (VOBA) and other intangible assets

Premiums due and other receivables

Reinsurance recoverables

Deferred tax asset, net

Ceded unearned premiums

Other assets

Policyholder and contract claims

Unearned premiums

Subsidiary borrowings

Other liabilities

Net identifiable assets acquired

Non-controlling interests

Net assets acquired

Goodwill

Assets acquired and liabilities assumed are adjusted to their acquisition date fair value based on the preliminary purchase price allocation.

This adjustment removes the $119 million of goodwill previously recognized by Argo, and the recognition of a goodwill of $16 million, based on the purchase price allocation as outlined above.

Reflects a decrease of $30 million in subsidiary borrowings and the corresponding decrease in interest expense associated with the difference between the estimated fair value and the carrying value of assumed debt on acquisition.

This relates to the payment of purchase price of $1.1 billion to Argo's historical common stockholders and the elimination of Argo's historical equity, in conjunction with the adjustment to reflect the cash position in the latest purchase price allocation.

These adjustments reflect the elimination of $95 million of historical deferred gain as it relates to cash collected upfront for premiums that have not been earned. The unearned premium is reset as part of the purchase price allocation within policy and contract claims.

This adjustment reflects the purchase accounting adjustments to the Argo historical deferred tax assets of $101 million. The Unaudited Pro Forma Statement of Operating Results has been adjusted to reflect the income tax and deferred tax impact of the transaction accounting adjustments based on an effective tax rate of 21%.

This adjustment eliminates the deferred policy acquisition costs previously recognized by Argo which do not represent rights to future cash flows, and now reflects the $180 million of VOBA recognized as part of purchase price allocation. This results in an increase of commission expenses for acquiring and servicing policies arising from amortization of $68 million for the six months ended June 30, 2023.

Reflects intangible assets of $136 million upon acquisition, primarily consist of insurance licenses, broker relationship, internally developed software, and trade names. Amortization expense of $19 million related to those with a definite useful life is included in Argo's Unaudited Pro forma Statement of Operating Results.

Reflects the accrual of $10 million of estimated transaction costs to be incurred by the Company in connection with its acquisition of Argo. These costs are reflected in the Unaudited Pro Forma Statement of Operating Results of the Company for the year ended December 31, 2022 and will not affect the Company's statement of operating results beyond 12 months after the acquisition date.

On February 2, 2023, Argo completed the sale of the entire issued share capital of Argo Underwriting Agency Limited for total consideration of $156 million, which included cash proceeds of $125 million and an additional $31 million placed in escrow related to certain reinsurance-related recoverables. The Unaudited Pro Forma Statement of Operating Results for the six months ended June 30, 2023 has been adjusted to give effect to the disposition by removing the results of disposed operations for the period from January 1, 2023 to the date of the disposal.

For the year ended December 31, 2022

In USD, millions

Premiums and other revenue:

Earned premiums

Net premiums

Net investment income

Investment related gains (losses), net

Net realized investment and other gains (losses)

Change in fair value recognized

Change in allowance for credit losses on fixed maturity securities

Total net investment and other gains (losses)

Total revenue

Expenses:

Losses and loss adjustment expenses

Claims and policyholder benefits

Underwriting, acquisition and insurance expenses

Commissions for acquiring and servicing policies

Non-operating expenses

Operating expenses

Interest expense

Fee and other income (expense), net

Foreign currency exchange gains (losses)

Impairment of intangible assets and goodwill

Total expenses

Income (loss) before income taxes

Income tax (provision) benefit

Net income (loss)

Dividends on preferred shares

Net income (loss) attributable to common shareholders

Attributable to:

Class A exchangeable and Class B shareholders

Class C shareholders

Non-controlling interests

The historical financial statements of Argo are prepared in accordance with U.S. GAAP. The Company has determined that there are no material differences in accounting policies applied by Argo and the Company.

Certain reclassification adjustments have been recorded to conform Argo's financial statement presentation to the presentation used by the Company.

On February 2, 2023, Argo completed the sale of the entire issued share capital of Argo Underwriting Agency Limited for total consideration of $156 million, which included cash proceeds of $125 million and an additional $31 million placed in escrow related to certain reinsurance-related recoverables. The Unaudited Pro Forma Statement of Operating Results have been adjusted to give effect to the disposition by removing the results of disposed operations for the year ended December 31, 2022.

Preliminary ASC 805 adjustments include the following:

Eliminates the deferred policy acquisition costs previously recognized by Argo which do not represent rights to future cash flows, and reflects the amortization of VOBA recognized as part of purchase price allocation. This results in a net increase to commissions for acquiring and servicing policies of $138 million for the year ended December 31, 2022.

Reflects the accrual of $10 million of estimated transaction costs to be incurred by the Company in connection with its acquisition of Argo. These costs are reflected in the Unaudited Pro Forma Statement of Operating Results of the Company for the year ended December 31, 2022 and will not affect the Company's statement of operating results beyond 12 months after the acquisition date. The adjustment also includes $38 million of amortization expense on the intangible assets with definite useful life recognized as part of the purchase price allocation.

Reflects a decrease in interest expense associated with the difference between the estimated fair value and the carrying value of assumed debt on acquisition.

The Unaudited Pro Forma Statement of Operating Results has been adjusted to reflect the income tax and deferred tax impact of the transaction accounting adjustments based on an effective tax rate of 21%.

The historical financial statements of Argo included an impairment of intangible assets and goodwill of $28 million, consisting of a $17 million impairment of indefinite lived intangible assets and $11 million of goodwill. These impairment charges have not been reversed. As Argo Underwriting Agency Limited was subsequently disposed of, the impairment charges are expected to be non-recurring.

As at June 30, 2023

In USD, millions

Assets

Investments:

Fixed maturity securities, available for sale, at fair value

Available-for-sale fixed maturity securities, at fair value

Equity securities, at fair value

Mortgage loans on real estate

Real estate investments related to consolidated variable interest entities

Limited partnerships and limited liability companies

Real estate and real estate partnerships

Derivative instruments

Other investments

Other invested assets, net

Total investments

Cash and cash equivalents

Coinsurance deposits

Reinsurance funds withheld

Market risk benefits

Deferred policy acquisition costs

Deferred sales inducements

Deferred income taxes

Accrued investment income

Income taxes recoverable

Other assets

Goodwill, VOBA and intangible assets

Total assets

Liabilities and Stockholders' Equity

Liabilities

Policy benefit reserves

Market risk benefits

Notes and loan payable

Subsidiary borrowings