Breakingviews: Brookfield finds it’s no fun to be half-married

Brookfield is in search of commitment. The Canadian firm said on Tuesday that its insurance arm had made a $4 billion takeover offer to American Equity Investment Life, a provider of annuity products, with which it previously had the corporate equivalent of an open marriage. While the last few years of experimentation were good for both sides, a more simple arrangement now makes sense.

Alternative asset managers like Brookfield are trying to raise as much capital as they can get, to deploy into leveraged buyouts, infrastructure investing and private lending. To that end, many have been acquiring insurers that write annuities. Customers pay in over many years with the hope of getting stable income to support their retirement. Brookfield or its kin can invest that money, collect fees, and rest assured that there’s little chance of the policyholder pulling out their money at short notice.

Despite its obvious charms to such suitors, American Equity has previously preferred to stay technically single. It sold a 20% stake to Brookfield back in 2020 to fend off an unwanted bid from two other insurers, giving the Canadians a board seat and the right to reinsure $10 billion of American Equity’s policies into the bargain. But when the annuity-peddler subsequently chased partnerships with others, including Apollo Global Management Co-founder Josh Harris’ fund 26North, Brookfield took the huff, with the firm’s insurance chief Sachin Shah resigning from American Equity’s board and making his disgruntlement over the strategy public.

Remaining independent, though, looks less appealing these days. Uniting with Brookfield would help American Equity make sure its policyholders’ money is earning enough to see them through their old age, with some left over for the company itself. It could also provide shareholders with a windfall: Brookfield’s offer of $55 per share is 53% more than had been offered by Athene, the Apollo-backed insurance firm behind 2020’s offer – and 22% higher than a later joint offer from insurer Prosperity and hedge fund Elliott Investment Management.

Those former suitors could return now that the company is in play. But American Equity’s head may now have been turned – Brookfield can only make its present bid because its target waived a contract preventing such an offer. That suggests a friendly and mutually advantageous union ahead.

(The name of Apollo Global Management’s co-founder and date of the deal announcement have been corrected in the first and third paragraphs of this article.)