Canadian private equity firm Brookfield Asset Management is launching a reinsurance company to cover for the billions of dollars of payments owed by an American life insurance company that Brookfield owns interest in.
The new Brookfield Asset Management Reinsurance (BAM Reinsurance) company will take responsibility for up to $10 billion worth of annuity policies written by American Equity Investment Life Insurance (AEL). BAM Reinsurance will be incorporated in Bermuda, but is expected to be listed in both New York and Toronto.
Brookfield had previously entered into a strategic partnership with AEL last month, wherein the former acquired a 19.9% ownership interest in the latter. Brookfield had specified that it would purchase the shares in two installments – with the second tranche expected to close in early 2021.
As part of that deal, Brookfield agreed to reinsure $5 billion of annuity policies that have already been written, and up to another $5 billion worth of future AEL business.
In a quarterly results report, Brookfield said that it intends to distribute a special dividend in the first half of 2021, with BAM Reinsurance a paired share with Brookfield Asset Management. The firm indicated that it expects this special dividend to be approximately $500 million (about 33 cents per share of BAM).
“BAM Reinsurance is intended to provide our shareholders with a choice of holding either shares of Brookfield or the new shares of BAM Reinsurance, depending on what is most attractive to them based on their own circumstances,’” said Brookfield chief financial officer Nick Goodman.
Goodman commented that the positive market reception – additionally considering the recent listing of Brookfield Renewable Corporation – encouraged Brookfield to offer a similar structure for its shareholders.