A prominent shareholder of American Equity Investment Life Holding Co. has stepped back from its fight with the West Des Moines insurer amid a federal investigation.
In a regulatory filing on Friday, Brookfield Asset Management disclosed that it won’t appoint a new representative to American Equity’s board because Department of Justice investigators are looking into whether Brookfield violated an antitrust law.
Brookfield, a Canadian private equity firm, has owned about 19% of American Equity’s stock since October 2020. An investment agreement between the companies gave Brookfield a seat on American Equity’s board.
But in May, Brookfield also purchased American National, a company that sells life, health and property and casualty insurance and annuities. According to Friday’s filing, the Department of Justice is investigating whether Brookfield violated a federal antitrust law that bans companies from holding board seats on certain competitors.
Brookfield leaders said in the filing they do not believe the company has violated any antitrust law and they will comply with the investigators’ inquiry. They also won’t appoint their representative to American Equity’s board.
“Brookfield Reinsurance believes that this matter has become a distraction from its primary objective of maximizing shareholder value and serving the interests of (American Equity’s) other stakeholders,” Brookfield’s leaders said in the filing.
A Brookfield spokesperson said in a statement Tuesday that antitrust investigations over board seats have “become routine across the (private equity) industry.” A Department of Justice spokesperson did not return a message seeking comment.
Brookfield’s disclosure about the investigation comes a month after American Equity CEO Anant Bhalla pointed to a potential problem with the investor holding stakes in the two competing firms.
“You can come to your own conclusions,” Bhalla told investors Dec. 7 about his relationship with Brookfield, a relationship that turned publicly hostile late last year.
An American Equity spokesperson declined to comment on whether the company asked the Department of Justice to investigate Brookfield.
Friday’s disclosure is the latest blow between American Equity and Brookfield, which aided the West Des Moines company just over two years ago. At the time, an investment from Brookfield helped American Equity resist a hostile takeover bid from Massachusetts Mutual Life Insurance Co. and West Des Moines-based Athene.
But in early November, Brookfield executives surprised American Equity leaders by pulling their representative off the company board, announcing the resignation in the midst of American Equity’s earnings call without tipping off the company in advance.
Bhalla has promoted a strategy since 2020 that he said would make American Equity more profitable by entering reinsurance transactions with private equity firms. The firms pay American Equity a fee for the right to manage some of American Equity’s assets.
In September, American Equity invested in 26North Partners, a new private equity firm launched by Apollo Global Management co-founder Josh Harris.
Brookfield didn’t publicly criticize the deal when it announced it was removing its representative from the board. But in early December, Brookfield executives sent a letter to American Equity, demanding Bhalla answer several questions about his relationship with 26North.
Meanwhile, Elliott Investment Management made a play for American Equity, offering to buy the insurer for $45 a share −about $6 more than the company’s shares were worth at the time. The deal could have netted Brookfield about $95 million.
After American Equity’s board rejected the offer twice, Brookfield leaders announced in a Dec. 22 filing that they would appoint a new representative to the board. They said they believed Elliott may make another offer. (An Elliott spokesperson did not return a message from the Register earlier this month.)
“In order to assist the board of directors of (American Equity) in its evaluation of this offer, and any other credible strategic alternatives that have surfaced or may in the future surface, we intend to exercise our right to nominate a replacement director to the board at this time,” Brookfield’s leaders said in the filing.
In Friday’s filing, Brookfield executives said they plan to hold American Equity “accountable” for recent decisions, including rejecting the Elliott offer. Brookfield also criticized American Equity for “a grossly disproportionate executive compensation scheme.”
According to a regulatory filing, Bhalla earned $8.2 million in 2021. The company has not disclosed the CEO’s 2022 compensation. But in November, the American Equity board approved a new incentive package for Bhalla that could earn him more than $70 million, depending on how the company’s stock price swings.
Tyler Jett covers jobs and the economy for the Des Moines Register. Reach him at tjett@registermedia.com, 515-284-8215, or on Twitter at @LetsJett.
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