Emerging signs point to a stronger possibility that Brookfield Reinsurance Ltd.'s bid to take over American Equity Investment Life Holding Co. may be more successful than past attempts.
Brookfield's proposal to buy American Equity Life feels different from other past ventures to snap up the West Des Moines-based life insurer due to the way the company is responding, according to analysts.
Brookfield, which already owns 20% of American Equity's shares, announced June 27 that it had made an offer to buy the remaining shares for $55 apiece. The offer values American Equity at almost $4.3 billion.
American Equity confirmed that it has received the proposal and said it is carefully reviewing the offer in line with its fiduciary duties. American Equity also granted the reinsurer a limited waiver of its standstill obligation under the existing investment agreement between the two companies which allowed Brookfield to make its offer.
An attractive offer
Keefe Bruyette and Woods analyst Ryan Krueger said in a note that it appears American Equity could be "working together" with Brookfield, pointing out that Brookfield had a standstill agreement through Oct. 2025 that would have prevented an unsolicited takeover attempt.
Brookfield's offer is the latest in a string of attempts to snap up American Equity, a company that has consistently rejected the offers it has received over the past few years.
American Equity has rejected two other unsolicited bids since 2020, one from Massachusetts Mutual Life Insurance Co. and Athene Holding Ltd. at $36 a share and one from Prosperity Group Holdings LP and Elliott Investment Management LP at $45 per share.
Athene and MassMutual's offer of $36 per share was the highest publicly disclosed based on a one-day premium basis of approximately 63.71%, but American Equity called that offer "opportunistic" and said it "significantly undervalues the company" as it rejected it.
On a pure dollar amount basis, Brookfield's bid for American Equity at $55 a share is the highest publicly disclosed bid the independent annuity provider has received since 2020.
But because American Equity did not immediately accept Brookfield's offer, it could signal the annuity provider's openness to another deal or a higher price, Piper Sandler analyst John Barnidge said in an interview.
In terms of other potential buyers for American Equity, Barnidge noted that there has been a flurry of risk transfer activity as of late related to growing interest in the sector due to growing rates. In May 2023 alone, life and annuity reinsurance transactions hit $61 billion.
Another individual annuity writer, Midwest Holding Inc., said its recent strategic review process resulted in 17 indications of interest from prospective bidders, 12 of which were financial in nature. After fielding multiple offers, the company ultimately agreed to a transaction with Antarctica Capital LLC.
American Equity reported $3.33 billion in annuity considerations in 2022, according to regulatory filings. The annuity provider's stock shot up as news of the offer from Brookfield broke rising to $52.55 a share as of close of business June 28, up 16.52% from $45.10 a share on June 26.
Brookfield's strategy
If Brookfield's bid for American Equity is successful, it will mark the reinsurer's third acquisition in the past two years.
Brookfield completed its acquisition of American National Group Inc. in 2022. The deal was an all-cash transaction valued at approximately $5.1 billion, or $190 per share.
More recently, Brookfield announced in February that it would acquire Argo Group International Holdings Ltd. in a deal valued at approximately $1.06 billion.
The Argo transaction was Brookfield's second large carrier M&A deal in recent years. It also represented a pivot for Brookfield to set insurance operations as the focus for the company that as recently as 18 months ago had intended to concentrate the majority of its inorganic growth pursuits on reinsuring blocks of life and annuity business.