Retirement planning annuity provider American Equity Investment Life Holding Company (AEL) has entered into a strategic partnership with Brookfield Asset Management, a private equity firm based in Canada, while snubbing a takeover bid from Athene Holding and Massachusetts Mutual Life Insurance Company.
Under the partnership, Brookfield will acquire a 19.9% ownership interest in AEL at about US$37 per share for an initial investment. According to company releases, Brookfield is purchasing the shares in two installments; the second tranche will be completed in early 2021.
“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,” said AEL chief executive officer Anant Bhalla in a statement.
“We are pleased to be investing in American Equity and to partner with the business in reinsurance as it grows its leading position as a retirement planning annuity provider,” commented Brookfield chief investment officer Sachin Shah. “This transaction represents a meaningful investment for us in the attractive US insurance market and we believe our alternative asset strategies can deliver long-term value to the company.”
As part of the arrangement, Brookfield will take a seat on AEL’s board. Brookfield will also reinsure up to US$10 billion of AEL fixed index annuity liabilities – consisting of an initial reinsurance of US$5 billion of existing liabilities and up to an incremental US$5 billion of future business.
The partnership comes after AEL rejected a takeover proposal from Athene Holding and Massachusetts Mutual Life Insurance Company (MassMutual), for US$36 a share. AEL had expressed that the earlier deal – valued at more than US$3 billion – had “undervalued the company” and was “opportunistic.”
“The board of directors and shareholders of American Equity will have to decide what is in the best interests of the company,” an Athene representative told Bloomberg in an email statement commenting on AEL’s partnership with Brookfield.
MassMutual was not immediately available for comment, according to the newswire.
Bloomberg reported that the partnership with AEL will be Brookfield’s biggest venture into insurance, citing a previous statement by CEO Bruce Flatt who told investors last month that the time is right to expand into the insurance sector, thanks to zero interest rates. Brookfield currently has about US$550 billion in assets under management.
