Brookfield Asset Management to Launch Reinsurer; Distribute Shares to Investors

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Brookfield Asset Management Inc. is launching a reinsurance business and plans to distribute shares in the new entity to its investors in the form of a $500 million special dividend.

Bruce Flatt, Brookfield’s chief executive officer, said in a letter to shareholders the firm has long mulled the idea of entering the reinsurance market, but had concerns about declining interest rates, which make it “unattractive” to lock in long-term liabilities at higher rates.

“Fast forward to 2020: interest rates globally have dropped to near zero, and while rates could go negative, in our view the odds do not favor that for any significant length of time,” Flatt said in the letter. “As a result, we believe the risk involved in reinsuring long-tail liabilities is the lowest it has ever been.”

Brookfield also lacked an adequate credit platform to support a reinsurer until recently, he added. The acquisition of a majority interest in Oaktree Capital Group LLC last year has resolved that concern.

“Together, these developments have meaningfully changed the nature of the opportunity for us,” he said.

Low-Carbon Investments

Brookfield said in a statement it intends to issue shares to investors in the newly-created Brookfield Asset Management Reinsurance Partners in the first half of 2021. It will be a special dividend valued at about 33 cents per Brookfield share. BAM Reinsurance will be structured as a “paired share” similar to how its infrastructure, renewable and property partnerships were done, the company said.

Flatt estimates the insurance sector could create a $100 billion to $200 billion business for Brookfield over time and took a first step through a partnership with American Equity Investment Life announced last month.

Flatt also discussed details of its new Global Transition Fund, which will be led by former Bank of England governor Mark Carney. The fund will be focused on ESG investing and initially will focus on investments that accelerate the world’s transition to a net-zero carbon economy. That business could eventually be worth $50 billion to $100 billion, he said.

Brookfield also reported Thursday its net income attributable to shareholders the third quarter fell to $172 million, or 10 cents a share, from $947 million, or 61 cents a share, for the same period last year.

Its funds from operations grew to more than $1 billion during the quarter, or 65 cents a share, from $826 million, or 54 cents a share, a year ago.

Brookfield said it raised $18 billion for private funds during the quarter and had $2.8 billion in cash and more than $75 billion in capital available for deployment.