A new Bermudian company is planned to reinsure $5 billion of annuities issued by American Equity Investment Life Holding Company.

Värde Partners, a hedge fund, will establish the new reinsurer.

The plan is the product of a strategic partnership between American Equity, Värde and Agam Capital Management, LLC, an insurance solutions provider.

American Equity, a New York Stock Exchange-listed company based in West Des Moines, Iowa, and Värde will jointly set up a company to manage the assets of the reinsurer.

A joint statement from the companies involved in the partnership said American Equity would have “a significant minority interest” in the new reinsurer and a 35 per cent interest in the new asset manager.

The statement added: “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.”

Bermuda’s long-term insurance and reinsurance sector has boomed in recent years. Companies like Legal & General Re, Athene Holdings, Wilton Re, Global Atlantic Re, Hannover Re and Somerset Re are all part of the flourishing sector. By the end of 2018, assets managed by the long-term sector in Bermuda had reached nearly $500 billion.

“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,” Anant Bhalla, chief executive officer of American Equity, said.

“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 $5 billion block of annuities to the reinsurer, American Equity shareholders would benefit by the freeing up of approximately $350 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, 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.

Agam’s co-founders, Chak Raghunathan and Avi Katz, said: “This transformative strategic partnership will set the standard for multidimensional solutions towards value creation in the retirement income market.”

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