Alternative asset manager Brookfield’s reinsurance entity to acquire Argo in $1.1bn deal

Brookfield Reinsurance, the Bermuda-based reinsurance entity of Brookfield Asset Management Inc., the giant Canadian headquartered alternative asset manager, has entered into a definitive agreement to acquire specialty re/insurer Argo Group International Holdings, Ltd. in an all-cash transaction valued at $1.1 billion.

Brookfield Asset Management has approximately $800 million of assets under management, and manages a range of public and private investment products and services for institutional and retail clients.

In late 2020, it announced the launch of its Bermuda domiciled reinsurer, Brookfield Asset Management Reinsurance Partners, which began trading in June 2021, later changing its name to Brookfield Reinsurance in December of 2022.

At launch, the asset manager explained that the idea is that the reinsurer trades at similar economic levels to Brookfield, providing an alternative route to access the returns of Brookfield’s investment prowess through a reinsurance structure.

After acquiring American National in an all-cash transaction valued at approximately $5.1 billion last year, as covered by our sister site Reinsurance News, Brookfield Reinsurance has today announced an agreement to acquire Argo Group, which it describes as “another milestone” in the ongoing expansion of its insurance solutions business.

As part of the arrangement, each issued and outstanding Argo common share will be converted into the right to receive $30.00 in cash at closing of the deal, funded by existing cash on hand and liquidity available to Brookfield Reinsurance.

Further, the merger consideration per Argo common share represents a 6.7% premium to the re/insurer’s closing share price on February 7, 2023, and a 48.7% premium over Argo’s closing share price on September 7, 2022. This was the last full trading day prior to Argo announcing the sale of Argo Underwriting Agency Limited and its Lloyd’s Syndicate 1200 and the continuation of its strategic alternatives review process.

The announcement notes that the Boards of both Brookfield Reinsurance and Argo unanimously approved the transaction, which, subject to approval by Argo shareholders and other customary closing conditions, is expected to complete in the second half of 2023.

In connection with execution of the merger, Argo investor Voce Capital Management LLC entered into a voting and support agreement whereby it agreed to vote all of the common shares held by it in favour of the merger and take certain other actions, subject to the terms and conditions of the voting and support agreement.

Argo has also agreed to suspend the payment of dividends on its common shares through the closing of the transaction.

“The acquisition of Argo represents another milestone in the continued expansion of our insurance solutions business. Argo’s leading U.S. specialty platform adds a foundational piece to our expanding U.S. P&C operations. We look forward to partnering with the Argo team to support the growth of its core businesses, build on its strong franchise, and deliver value for policyholders,” said Sachin Shah, Chief Executive Officer (CEO) of Brookfield Reinsurance.

Thomas A. Bradley, Argo’s Executive Chairman and CEO, added, “This transaction brings a successful conclusion to Argo’s strategic alternatives review process and represents the best path forward for Argo, our employees and policyholders while also maximizing value for our shareholders. By joining Brookfield Reinsurance, Argo will continue to serve our brokers with greater financial strength and opportunities to grow as a U.S.-focused specialty insurer.”

So, it seems as though Brookfield is an asset manager with an increasing appetite for reinsurance, with the acquisition of Argo following a strategic partnership with American Equity Investment Life Holding Company in 2020, under which Brookfield reinsured $5 billion of existing liabilities and up to an incremental $5 billion of new sales of American Equity’s IncomeShield or similar fixed index annuity products.