Brookfield’s new insurance firm buys US insurer for US $ 5.1 billion as it accelerates entry into industry – .

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The deal, announced Monday, is the latest sign of Brookfield’s strong interest in insurance, particularly annuities, a company in which the Toronto conglomerate has been active for half a decade.

Mark Blinch/Reuters

Brookfield Asset Management recently split The insurance company closes its first big deal with the US $ 5.1 billion cash purchase of Texas-based American National Group Inc., a seller of a wide range of products ranging from annuities to car insurance.

The deal, announced Monday, is the latest sign of Brookfield’s strong interest in insurance, particularly annuities, a company in which the Toronto conglomerate has been active for half a decade. Annuities generated about 18% of American National’s revenue in 2020, according to S&P Global Market Intelligence, and insurance contracts make up a large portion of the company’s balance sheet.

American National also has a large property and casualty insurance company that insures homes, cars, boats, motorcycles and recreational vehicles. According to S&P Global Market Intelligence, approximately US $ 1.6 billion of American National’s US $ 3.8 billion in total revenue came from property and casualty insurance.

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American National also has an annuity-free life insurance business, and a small portion of its sales come from Medicare. The company claims to have more than $ 100 billion in insurance policies in force.

Brookfield’s zeal for insurance has been matched by other large institutional investors in recent years. Insurance companies, especially those specializing in the sale of annuities, suffer from low returns on their fixed income investments. Alternative asset managers like Brookfield can provide new investment opportunities for insurers, and institutional investors get a new source of money to invest.

Brookfield sold Brookfield Asset Management Reinsurance Partners Ltd. to its shareholders at the end of June, and Brookfield Reinsurance is now listed on the Toronto and New York stock exchanges. the shares closed at $ 73.02 in Toronto on Monday, a high after the fallout.

Brookfield Reinsurance owns Brookfield Annuity, a company launched in 2016 to operate in the Canadian “risk transfer” pension industry, in which employers who sponsor defined benefit pension plans purchase annuities from Brookfield to reduce or eliminate their risks of payment of pensions and benefits. to retirees. Brookfield Reinsurance now has $ 1.6 billion in reserves for policyholders.

Brookfield Reinsurance also has a US $ 337 million investment in American Equity Investment Life Holding Co. (AEL), a US seller of life insurance and annuities. Brookfield assumed a nearly 10% stake in the Iowa insurer in November 2020, with plans to reinsure up to US $ 10 billion in AEL annuities. Brookfield Reinsurance is still awaiting approval from US regulators for the reinsurance deal, hoping to finalize the deal this quarter and increase its stake in AEL in some time. after.

By paying US $ 190 per share for American National, which trades on the Nasdaq stock exchange, Brookfield Reinsurance is offering a 55% premium on the company’s stock price in May, before media revealed it would consider a sale. The offer price is just under 10 percent above the last Friday close of US $ 172.80.

Brookfield Reinsurance said it intends to keep the management of American National and its headquarters in Galveston, Texas intact. continue to grow the business and maintain a strong franchise for the benefit of all stakeholders.

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American National CEO Jim Pozzi said, “Brookfield Reinsurance has been very clear – they want us to continue to grow our business, with our leadership team and our great team of employees and distribution partners. He said his company was considering “a range of strategic alternatives and possible business opportunities to maximize value for our shareholders.”

According to S&P Global Market Intelligence, the purchase price of American National by Brookfield Reinsurance for American National is lower than the current average multiples of multi-industry insurance companies based on price / earnings, price / income and book value.

American National was founded by William L. Moody Jr. in 1905. The Moody Family Trusts and related entities still own approximately 70 percent of the company, and family members serve on the company’s board of directors. . The rest of the shares are traded on the Nasdaq.

When Brookfield divested its reinsurance business in June, it told investors that there are “two long-term tailwinds” that are creating demand for the company’s products: Aging populations are increasingly looking for products. insurance for retirement planning, and these products offer stable and protected returns. in a period historically low interest rates.

Brookfield also said several factors could cause insurance companies to partner with its new insurance business, including Brookfield’s alternative investment products, the desire to free up capital and low valuations in the public markets. for insurers.

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