American Equity Board Prefers Brookfield Deal to Athene-MassMutual Offer

American Equity recently announced a reinsurance agreement with Värde Partners and Agam Capital Management. Värde, a Minneapolis-based money manager, said it will form a Bermuda-based reinsurance company that will reinsure $5 billion of American Equity non-variable indexed annuity obligations. The companies said Agam will help with risk management.

American Equity says the Brookfield deal will build on the Värde-Agam deal.

Brookfield Asset Management

Brookfield Asset Management is a Toronto-based financial services company that's managing about $500 billion in assets.

An arm of the company recently acquired control of Genworth MI Canada, a mortgage insurance provider in Canada, from Genworth Financial.

American Equity's Assessment of the Brookfield Deal

American Equity told investors during a conference call held Sunday that the Brookfield reinsurance arrangement would free about $300 million in American Equity capital, and start to generate stable, recurring, fee-like income.

The Brookfield deal also creates opportunities for American Equity and its shareholders to benefit from portfolio gains, and it will help American Equity shift toward tying earnings to its assets, rather than tying earnings to its equity, American Equity said.

Dear Athene and MassMutual…

Matovina and Bhalla wrote in their letter to Athene and MassMutual that American Equity's board "undertook an extensive, year-long review of strategic alternatives from the spring of 2018 through early June 2019.

The board talked to "strategic and other interested parties," Matovina and Bhalla wrote.

The board was willing to consider a range of options to enhance shareholder value, but the strategic review "did not result in any offers that were compelling or actionable," and the review process was "very disruptive to the company's employees and agents," Matovina and Bhalla wrote.

"Given our strong stand-alone prospects and our prior experience with this strategic review, our board does not believe that engaging on this unsolicited proposal is in our shareholders' and other stakeholders' best interests at this time," Matovina and Bhalla wrote.

Correction: An earlier version of this article described American Equity's concerns about the impact of the strategic review process incorrectly. Company leaders said they believe the review process itself was disruptive.

— Read American Equity Announces $5 Billion Deal Agreement, on ThinkAdvisor.

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