American Equity Investment Life Holding Company has announced that it has entered into a strategic partnership with Brookfield Asset Management.
The partnership will include the reinsurance of $5 billion of existing liabilities and up to an incremental $5 billion of new sales of American Equity’s IncomeShield or similar fixed index annuity products.
American Equity will receive access to Brookfield investments in targeted asset classes as part of the strategic partnership.
As part of this strategic partnership, Brookfield will acquire a 19.9% ownership interest in the common shares of American Equity.
The equity investment will take place in two stages: an initial purchase of a 9.9% equity interest at $37.00 per share promptly following Hart-Scott-Rodino approval, and a second purchase of an incremental 10.0% equity interest, at the greater value of $37.00 per share or adjusted book value per share.
This will exclude AOCI and the net impact of fair value accounting for derivatives and embedded derivatives.
The second equity investment is subject to finalisation of certain reinsurance agreement terms, receipt of applicable regulatory approvals and other closing conditions and is expected to close in the first half of 2021.
In addition, Brookfield has agreed not to transfer any common shares purchased in the equity investment for a period of two years after the applicable closing of the investment, as well as to customary standstill restrictions until the five-year anniversary of the initial equity investment, in each case, subject to certain exceptions.
Brookfield will also receive one seat on American Equity’s Board of Directors following the initial equity investment.
Anant Bhalla, President and Chief Executive Officer of American Equity, said: “This compelling strategic transaction, which we have been discussing with Brookfield since March, demonstrates the substantial shareholder value we are creating through execution of our AEL 2.0 strategy.
“By partnering with a world-class asset management and investment firm like Brookfield, we are accelerating the implementation of our strategy to be the leading, customer-focused annuity provider with best-in-class capabilities across the entire insurance value chain, from distribution to asset management.
“This partnership accelerates the transformation of our business toward a ROA model from our historical focus on ROE, unlocks new investment opportunities, and enables us to deliver significant value to our shareholders and policyholders.”
Sachin Shah, Brookfield’s Chief Investment Officer, added: “We are pleased to be investing in AEL and to partner with the business in reinsurance as it grows its leading position as a retirement planning annuity provider.
“This transaction represents a meaningful investment for us in the attractive U.S. insurance market and we believe our alternative asset strategies can deliver long-term value to the company.
“We look forward to supporting American Equity in advancing its AEL 2.0 strategy which is well-positioned to create value for all stakeholders.”