American Equity Investment Life Holding Co., an issuer of fixed index annuities based in West Des Moines, announced it has reached an agreement in principle to form a strategic partnership with global alternative investment firm Värde Partners and Agam Capital Management LLC, an insurance services provider. 

Under the terms of the agreement in principle, Värde will establish a Bermuda reinsurance company that will reinsure $5 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% interest in the newly formed asset manager.

Each of the three companies brings distinct capabilities to the partnership, the organizations said in a joint press release.

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,” said Anant Bhalla, CEO of American Equity. 

“This is the first of many steps in us executing our new AEL 2.0 strategy,” Bhalla said. “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 $5 billion block of annuities to the reinsurer, American Equity shareholders would benefit by the freeing up of approximately $350 million of capital, he said. 

“Finally, this is intended to provide American Equity with access to differentiated asset origination, which creates investment flexibility across market cycles,” Bhalla said. “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, a partner at Värde, said: “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, based in Teaneck, N.J., a year ago formed a joint venture with Varde aimed at providing a “turnkey solution for financial modelling and enterprise risk management to provide comprehensive economic solutions to life insurance companies.” The companies said at that time that they’re seeking initially to invest $500 million in complex life insurance, annuity and reinsurance assets that will be supported by the joint venture. 

In today’s announcement with American Equity, Agam’s co-founders, Chak Raghunathan and Avi Katz, said: “This transformative strategic partnership will set the standard for multi-dimensional solutions towards value creation in the retirement income market.”  

The partnership is intended to be finalized in the first half of 2021, pending regulatory approvals and customary closing conditions.