Athene, MassMutual Offer $3 Billion for American Equity

Buyers have come shopping for two annuity businesses in Iowa.

Athene Holding Ltd. and Massachusetts Mutual Life Insurance Company have teamed up to make a $3 billion cash acquisition offer for American Equity Investment Life Holding Company.

In a separate deal, Aspida — an insurance arm of Ares Management Corp., a money manager —  has agreed to acquire F&G Reinsurance Ltd. from FGL Holdings, for a price that was not disclosed.

Resources

• An SEC filing related to the Athene/MassMutual offer for American Equity is available here.
• A copy of the Ares F&G Re offer is available here.
• An article about American Equity’s own financing deal proposal is available here.

Athene and MassMutual sent American Equity a confidential letter talking about why an insurer like American Equity might want to be acquired.

“As with the rest of the industry, American Equity is facing headwinds due to low interest rates and the potential for elevated credit losses,” Athene and MassMutual said in the letter, which was came into the hands of a reporter for the Wall Street Journal. “As a result, the stock price and operations will likely continue to face volatility and downward pressure.”

Athene filed a copy of the letter with the U.S. Securities and Exchange Commission, along with a copy of the Wall Street Journal article, after the article appeared.

Athene and MassMutual and American Equity

Athene is a Pembroke, Bermuda-based company has used cash from Apollo Global Management and other sources to buy Aviva USA, and to make big transactions with Voya, Lincoln and Jackson National.

MassMutual is a giant, Springfield, Massachusetts-based mutual life insurer. A mutual life insurer is one that’s owned by its policyholders.

American Equity is a publicly traded, West Des Moines, Iowa-based company that’s best known as an issuer of indexed annuities.

Athene and MassMutual made their offer for American Equity Sept. 8. The would-be buyers said that MassMutual wants to continue to operate American Equity as a stand-alone company.

“We have a strong desire to grow the American Equity franchise and support new business volumes through MassMutual’s anticipated investments in technology, and by expanding product offerings,” Athene and MassMutual said. “We believe we can further enhance American Equity’s competitiveness in the marketplace through leveraging MassMutual’s distinctive asset management and state-of-the-art policy administration capabilities.”

The deal will be be good for shareholders and American Equity customers, because Athene and MassMutual are both extremely well capitalized, and the transaction would be financed with existing capital resources, Athene and MassMutual said.

American Equity reacted earlier this week, without disclosing the Athene-MassMutual acquisition offer, by saying it had lined up an alternative arrangement: a deal to sell its reinsurance arm to a new, Bermuda-based reinsurer that would be set up by Värde  Partners of Minneapolis and Agam Capital Management of Teaneck, New Jersey.

That deal would leave American Equity in charge of its own destiny.

After the Wall Street Journal article appeared, American Equity put out a statement with the headline “American Equity Confirms Receipt of Unsolicited Non-Binding Acquisition Proposal.”