American Equity Investment Life Holding Company (American Equity), an issuer of fixed index annuities, Värde Partners (Värde), a global alternative investment firm, and Agam Capital Management (Agam), an insurance solutions provider, have reached agreement in principle to form a strategic partnership intended to drive value for investors, retirement planners and retirees by combining the capabilities, resources and expertise of each organisation.Under the terms of the agreement in principle, Värde will establish a Bermuda reinsurance company that would reinsure USD5 billion of American Equity fixed index annuity liabilities. American Equity and Värde will also jointly establish an asset management entity to provide insurance asset management services to the reinsurance company. American Equity is intended to have a significant minority interest in the new reinsurer and a 35 per cent interest in the newly formed asset manager.
Each of the three companies brings distinct capabilities to the partnership. American Equity brings distribution, policyholder service and administration, product development and insurance specific asset management expertise. Värde brings alternative asset management capabilities and Agam brings differentiated risk management solutions. By combining these complementary capabilities in a new reinsurance company and a new asset management entity, all three partners will benefit from the growth of the reinsurance business and assets under management.
“We are very pleased to announce our strategic partnership with Värde and Agam, which we believe could define the next phase in the evolution of the intersection of the insurance and asset management sectors,” says Anant Bhalla, CEO of American Equity. “This is the first of many steps in us executing our new AEL 2.0 strategy. This would expand our presence into new markets with world class partners through strong structural and economic alignment. As this venture scales, it would expand American Equity into the global life and annuity reinsurance and third party insurance asset management businesses. Additionally, by starting this venture with plans to transfer a USD5 billion block of annuities to the reinsurer, American Equity shareholders would benefit by the freeing up of approximately USD350 million of capital. Finally, this is intended to provide American Equity with access to differentiated asset origination which creates investment flexibility across market cycles. This would ultimately enable the company to offer more attractive, and a wider variety of, products to America’s retirees and pre-retirees.”
Elena Lieskovska, Partner at Värde, says: “Värde is pleased to partner with American Equity as we grow our global insurance asset management business with Agam. This is a strategic extension of our long established capabilities as a leading investor in credit and alternatives. Our goal is to build a world-class insurance solutions platform combining Värde’s core strengths and Agam’s differentiated pALM technology and insurance expertise. Through this partnership we anticipate being able to execute on a number of follow-on transactions in the life and annuity space.”
Agam’s co-Founders, Chak Raghunathan and Avi Katz, says: “This transformative strategic partnership will set the standard for multi-dimensional solutions towards value creation in the retirement income market. We believe that Agam’s differentiated pALM platform will provide the foundation for the robust ALM and ERM infrastructure underpinning this initiative and, combined with Värde’s world class investment management capabilities, will unlock significant value for American Equity. We look forward to working with Anant and his leadership team as we embark on this exciting long-term partnership.”
