US life insurer accepts Brookfield Re buyout

American Equity Investment Life Holding Company has agreed to accept a bid by Bermuda-based Brookfield Reinsurance in which Brookfield will buy the 80% of the shares it does not already own in the US independent annuity issuer in a cash and stock transaction that values AEL at approximately $4.3 billion.

As part of the agreement, each AEL shareholder will receive $55.00 per AEL share, consisting of $38.85 in cash and 0.49707 of a Brookfield Asset Management Ltd. having a value equal to $16.15. The offer of $55 per share represents a 35% premium to AEL’s closing price on June 23, 2023.

Sachin Shah, chief executive officer of Brookfield Reinsurance, said: “This transaction represents an important step in the continued growth of our insurance business, further diversifying, and scaling, our insurance capabilities, and is a direct result of the partnership we have developed with AEL since our initial investment in 2020.

"With this transaction we have now deployed or committed over $10 billion of capital since our inception, bringing our total insurance assets to over $100 billion, and we remain on track with our growth targets for the business. Brookfield Reinsurance remains well capitalized and committed to meeting the needs of its policyholders and clients.”

Jon Bayer, managing partner, Brookfield Reinsurance, said: “Given the complementary nature of AEL’s leading fixed annuity business to our existing platform, we expect to accelerate growth in collaboration with our distribution partners and employees while continuing to meet the needs of our policyholders and other stakeholders. Under its current leadership, AEL has been transformed into an innovative, asset light insurer that is positioned for growth, and we look forward to building on our successful partnership.”

Anant Bhalla, president and chief executive officer of AEL, said: “We are pleased to have reached this agreement with Brookfield Reinsurance and believe this transaction provides an excellent outcome for all AEL shareholders, policyholders and other stakeholders. The significant premium that will be delivered to shareholders as a result of this transaction is a testament to our strong performance and AEL’s successful transformation under the AEL 2.0 strategy into an asset light insurer and asset manager.

"The transaction represents an opportunity for AEL shareholders, through the BAM Shares, to remain invested in a market leading global alternative asset manager. I couldn’t be more excited about the potential opportunities for our people and benefits for policyholders as part of a preeminent global financial institution.”

David Mulcahy, non-executive chairman of AEL’s board, said: “On behalf of the entire board, I am incredibly proud of AEL’s achievements and record of value creation for all stakeholders under the AEL 2.0 model. Thanks to Anant, the entire management team and our dedicated employees across our platform for their role and contributions in achieving this great outcome with Brookfield Reinsurance.”

Brookfield Re said it expects to maintain AEL’s headquarters in Des Moines, Iowa and that growth in the AEL platform over time should increase net jobs in Iowa. Brookfield Reinsurance also looks forward to supporting the greater Des Moines area, including through maintaining AEL’s existing charitable contributions and through Brookfield’s broader charitable foundation and other charitable initiatives.

Brookfield Re said it also 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.

The transaction caps several years of takeover interest in American Equity from various suitors and adds to the $15 billion in insurance company acquisitions announced globally over the past 12 months, data compiled by Bloomberg showed.

Brookfield Re plans to acquire Brookfield Asset Management shares from the Canadian investment group’s holding company, Brookfield Corp., to satisfy the stock portion of the bid, Bloomberg said last week. That setup would ensure the deal won’t be dilutive to shareholders of any Brookfield entity.

Ardea Partners and JPMorgan Chase & Co. are advising West Des Moines, Iowa-based American Equity, described by the Wall Street Journal as the last large independent seller of annuities.

“Annuity players like AEL are a natural fit for larger asset managers that are able to generate synergies in asset accumulation and portfolio management,” analysts at Truist Securities wrote in a note, Bloomberg reported. “Given the large number of players in the industry and AEL’s modest market share, there should be no antitrust concerns.”

In December, American Equity rejected an unsolicited offer of $45 per share from rival insurer Prosperity Life Insurance Group that was backed by hedge fund Elliott Investment Management. Prosperity Life said in February it was withdrawing the proposal after American Equity refused to engage.

Before the latest share price jump, shares of American Equity had gained roughly 60% under the tenure of Bhalla, a former MetLife and American International Group executive who took the helm in early 2020. He’s been striking annuity deals with asset managers as a way to create a diversified portfolio and increase yield on its investments, part of a strategy dubbed “AEL 2.0.”

American Equity has announced partnerships with 26North Partners, the private equity firm started by Apollo co-founder Josh Harris, as well as alternative asset manager Varde Partners and Agam Capital Management. It’s also been ramping up its allocations to private assets.

American Equity, which sells annuities and other insurance products, has long been a takeover candidate. It attracted a bid in 2020 from Massachusetts Mutual Life Insurance Co. and Apollo Global Management Inc.’s Bermuda-based Athene Holding Ltd. American Equity averted that deal by selling a stake to Brookfield, which also signed a multiyear agreement to reinsure as much as $10 billion in existing and future annuity liabilities.

Brookfield Re's bid preceded an announcement by European life insurance giant Aegon that it plans to move its domicile from The Netherlands to Bermuda, although it will not change its tax residence.

Brookfield has also bought a large Front Street, Hamilton building which it plans to tear down and replace with a new office building for Brookfield Re and other Bermuda-based Brookfield affiliates.