American Equity Agrees to $4.3B Offer From Brookfield Re

What You Need to Know

American Equity has rejected at least two earlier offers.
Brookfield Re previously acquired American National.
One Brookfield executive is the former U.S. Federal Insurance Officer director.

The board of American Equity Investment Life has agreed to move forward on a $55-per-share acquisition offer from Brookfield Reinsurance, an affiliate of Brookfield Corp., a large Canadian asset manager, the companies announced Wednesday.

American Equity helped create the modern U.S. indexed annuity market. It generated $964 million in U.S. individual non-variable annuity indexed annuity sales in the first quarter and had a 4.2% share of sales in that market, according to LIMRA.

Brookfield Re, the would-be buyer, said it intends to keep American Equity’s headquarters offices in West Des Moines, Iowa, and increase sales of the company’s annuities.

The companies plan to complete the deal by June 30, 2024.

What It Means

Asset managers continue to believe that selling annuities to your clients is an attractive business.

The History

American Equity was founded in 1995. It generated $124 million in operating income in the first quarter on $663 million in revenue, and it ended the quarter with $75 billion in assets.

In 2020, company managers rejected a 2020 $3 billion takeover offer from Athene Holding and Massachusetts Mutual Life.

American Equity used a reinsurance relationship with Brookfield Re to fend off the Athene-MassMutual offer, and the Toronto-based company now controls 20.38% of American Equity’s voting shares.

In February, managers rejected a $3.4 billion offer from a company backed by Elliott Investment Management.

Brookfield Re announced the new offer for American Equity last week. Brookfield Corp. has been building up U.S. insurance operations since 2020, and it closed on a $5.1 billion acquisition of American National Group in May 2022.

The Plan

Brookfield Re said it will pay $38.85 in cash and $16.15 in stock from another Brookfield Corp. company, Brookfield Asset Management Ltd., for each American Equity share.

The Future

Many U.S. life and annuity issuers now say they want to become “asset-light” companies, meaning that they will focus mainly on designing, selling and administering life insurance and annuity products and use reinsurance arrangements and other mechanisms to put some or all of the assets supporting the products on the balance sheets of other companies.

Jon Bayer, a Brookfield Re managing partner, said he believes American Equity’s management team has succeeded at transforming the company into an “innovative, asset-light insurer that is positioned for growth.”

American Equity’s annuity business complements the annuity business that Brookfield Re already has, Bayer said in a comment on the deal.

“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,” Bayer said.

The People

Before Bayer began working for Brookfield Re, in 2021, he was head of corporate development at F&G Annuities & Life.

At Brookfield Re’s parent company, Brookfield Corp., the vice chair of insurance solutions is Michael McRaith. McRaith is the former Illinois state insurance director and the former director of the U.S. Treasury Department’s Federal Insurance Office.

At the FIO, McRaith helped federal financial services regulators monitor the U.S. insurance industry and work with insurance regulators in other countries.