A strategic partnership between American Equity Investment Life Holding Company, Värde Partners, and Agam Capital Management, LLC has been announced, which, will see the establishment of a new Bermuda-based reinsurance company.
The partnership between American Equity, an issuer of fixed index annuities, Värde, a global alternative investment firm, and Agam, a provider of insurance solutions, is expected to create value for investors, retirement planners and retirees by combining the capabilities, expertise and resources of each entity.
Under the terms of the agreement, which has been reached in principle, Värde will establish a new Bermudian reinsurer that would reinsure $5 billion of American Equity fixed index annuity liabilities. Additionally, Värde and American Equity will jointly launch an asset management firm to provide insurance asset management services to the new reinsurance company.
It’s expected that American Equity will have a significant minority interest in the new reinsurance firm and a 35% stake in the newly established asset manager.
An announcement on the arrangement states that each of the three firms brings distinct capabilities to the strategic partnership. American Equity brings distribution, policyholder service and administration, alongside product development and insurance specific asset management expertise. Värde brings alternative asset management capabilities to the table, while Agam brings differentiated risk management solutions.
The combination of these capabilities in a new reinsurer and asset manager will see all three companies benefit from the growth of the reinsurance company and assets under management.
Anant Bhalla, Chief Executive Officer (CEO) of American Equity, commented: “We are very pleased to announce our strategic partnership with Värde and Agam, which we believe could define the next phase in the evolution of the intersection of the insurance and asset management sectors.
“This is the first of many steps in us executing our new AEL 2.0 strategy. This would expand our presence into new markets with world class partners through strong structural and economic alignment. As this venture scales, it would expand American Equity into the global life and annuity reinsurance and third party insurance asset management businesses. Additionally, by starting this venture with plans to transfer a $5 billion block of annuities to the reinsurer, American Equity shareholders would benefit by the freeing up of approximately $350 million of capital.
“Finally, this is intended to provide American Equity with access to differentiated asset origination which creates investment flexibility across market cycles. This would ultimately enable the company to offer more attractive, and a wider variety of, products to America’s retirees and pre-retirees.”
Elena Lieskovska, Partner at Värde, added: “Värde is pleased to partner with American Equity as we grow our global insurance asset management business with Agam. This is a strategic extension of our long established capabilities as a leading investor in credit and alternatives. Our goal is to build a world-class insurance solutions platform combining Värde’s core strengths and Agam’s differentiated pALM technology and insurance expertise. Through this partnership we anticipate being able to execute on a number of follow-on transactions in the life and annuity space.”
While Chak Raghunathan and Avi Katz, Agam’s co-Founders, said: “This transformative strategic partnership will set the standard for multi-dimensional solutions towards value creation in the retirement income market. We believe that Agam’s differentiated pALM platform will provide the foundation for the robust ALM and ERM infrastructure underpinning this initiative and, combined with Värde’s world class investment management capabilities, will unlock significant value for American Equity. We look forward to working with Anant and his leadership team as we embark on this exciting long-term partnership.”
Pending regulatory approvals and customary closing conditions, the partnership is intended to be completed in the first half of 2021.