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Brookfield Reinsurance Reports Second Quarter Results and Announces Regular Distribution

·11 min read
Brookfield Asset Management Reinsurance Partners Ltd.
Brookfield Asset Management Reinsurance Partners Ltd.

BROOKFIELD, NEWS, Aug. 11, 2022 (GLOBE NEWSWIRE) -- Brookfield Reinsurance (NYSE, TSX: BAMR) today announced financial results for the quarter ended June 30, 2022.

Sachin Shah, CEO of Brookfield Reinsurance, stated, “With the closing of American National, we now manage over $40 billion of assets, a substantial portion of which are in cash and short-dated liquid securities. Our focus now shifts to investing these assets for value in a rising rate environment.”

Unaudited
As at and for the periods ended June 30
(US$ millions, except per share amounts)

Three Months Ended

 

Six Months Ended

 

2022

 

 

2021

 

 

2022

 

 

2021

Total Assets

$

41,019

 

$

2,640

 

$

41,019

 

$

2,640

Adjusted equity1

 

3,767

 

 

1,252

 

 

3,767

 

 

1,252

Distributable operating earnings1

 

46

 

 

3

 

 

59

 

 

6

Net income2

 

1

 

 

2

 

 

129

 

 

5

Net income per class A & class B share3,4

$

0.14

 

$

 

$

0.28

 

$

Net income per class C share3

$

0.06

 

$

 

$

4.99

 

$

  1. See Non-IFRS and Performance Measures on page 6 and a reconciliation from net income and reconciliation from equity on page 5.

  2. Net income for the three and six months ended January 1, 2021 to June 28, 2021 are attributed to our predecessor company Brookfield Annuity Holdings Inc.

  3. For the period from June 28, 2021 onward.

  4. Class A and class B shares receive distributions at the same amount per share as the cash dividends paid on each Brookfield Class A Share.

Highlights

  • Completed the acquisition of American National Group, Inc. (“American National”) for approximately $5.1 billion

  • Closed 7 transactions within our Pension Risk Transfer (“PRT”) business, representing $1.0 billion of new premiums, including the single largest PRT transaction ever closed in the Canadian market

  • Added over $200 million of flow premiums from reinsurance treaties closed in late 2021, and expanded the reinsured products under our agreement with American Equity Life Insurance Company (“AEL”) to provide additional flow business and accelerate our path to $10 billion of reinsured liabilities

Operating Update

During the quarter, we received over $200 million of flow business under our existing reinsurance treaty with AEL, bringing total premiums reinsured to date to $5 billion under our $10 billion reinsurance agreement. Our Canadian PRT business continues to be active in identifying opportunities, successfully securing $1.0 billion of new transactions in the second quarter.

We recognized $46 million of Distributable Operating Earnings (“DOE”) for the three months ended June 30, 2022 compared to $3 million in the prior year period. The increase was driven by higher net investment income across our reinsurance and PRT businesses and benefitted from a one month contribution from American National, which closed in late May 2022. During the quarter, we made significant progress in redeploying our reinsurance treaty assets received from our transactions that closed late in 2021, and we expect to see further benefit in the coming quarters as we continue to reposition our investment portfolios.

We recorded net income of $1 million for the three months ended June 30, 2022, driven by contributions from DOE noted above, offset by transaction and other one-time expenses.

Today, we have approximately $1.9 billion of available corporate liquidity, with an additional $23 billion of liquidity within our insurance portfolios, giving us flexibility to invest as interest rates rise and attractive investment opportunities present themselves. While maintaining significant liquidity, we have been active in deploying the assets received from recently closed transactions into higher yielding alternative strategies.

Appointment of Chief Financial Officer and Chief Investment Officer

Also effective today, Brookfield Reinsurance announced the appointment of Thomas Corbett as Chief Financial Officer and Lorenzo Lorilla as Chief Investment Officer.

Mr. Corbett joined Brookfield in 2008 and since then has held a number of senior finance positions in Brookfield’s Asset Management and Renewable Power groups including Chief Financial Officer of its Brazilian renewable power operations as well as Chief Financial Officer of Brookfield’s energy marketing group. Mr. Corbett was most recently a Managing Director of Brookfield, responsible for the global accounting and financial reporting functions. Mr. Corbett is a Chartered Professional Accountant and holds a Bachelor of Commerce from Carleton University.

Mr. Lorilla joined Brookfield in 2021 and was most recently a Managing Partner and Deputy Chief Investment Officer responsible for asset allocation and execution of investment strategy for Brookfield Reinsurance. Prior to joining Brookfield, Mr. Lorilla was Deputy Chief Investment Officer of Kuvare Insurance Services, and previously, Head of Credit Investments at Global Atlantic Financial Group as well as its predecessor, the Goldman Sachs Reinsurance Group. Mr. Lorilla holds a Master of Engineering from Massachusetts Institute of Technology.

"We’re excited to welcome Tom and Lorenzo in their new roles,” said Mr. Shah. "Tom and Lorenzo bring extensive financial, operational, and strategic experience and have been valuable members of the leadership team responsible for the buildout of Brookfield’s insurance platform to date. We look forward to continuing the growth of our business with their support.”

Regular Distribution Declaration

The Board declared a quarterly distribution of $0.14 per share, payable on September 29, 2022 to shareholders of record as at the close of business on September 14, 2022. This dividend is identical in amount per share and has the same payment date as the quarterly distribution announced today by Brookfield Asset Management Inc. (“Brookfield”) on its Class A limited voting shares (“Brookfield Class A Shares”).

Brookfield Asset Management Operating Results

An investment in Class A Shares of our company is intended to be, as nearly as practicable, functionally and economically, equivalent to an investment in the Brookfield Class A Shares. A summary of Brookfield’s second quarter and last twelve months operating results is provided below:

Unaudited
For the periods ended June 30
(US$ millions, except per share amounts)

Three Months Ended

 

Last Twelve Months Ended

 

2022

 

 

2021

 

 

2022

 

 

2021

Net income

$

1,475

 

$

2,429

 

$

10,618

 

$

8,562

Net income attributable to common shareholders

$

590

 

$

816

 

$

3,864

 

$

2,866

Per Brookfield share

 

0.34

 

 

0.49

 

 

2.30

 

 

1.76

Funds from operations

$

1,399

 

$

1,600

 

$

6,133

 

$

7,556

Per Brookfield share

 

0.84

 

 

1.01

 

 

3.69

 

 

4.80

Distributable earnings before realizations

$

1,009

 

$

802

 

$

3,881

 

$

3,100

Given the economic equivalence, we expect that the market price of the Class A Shares of our company will be impacted significantly by the market price of the Brookfield Class A Shares and the business performance of Brookfield as a whole. In addition to carefully considering the disclosure made in this news release in its entirety, shareholders are strongly encouraged to carefully review Brookfield’s letter to shareholders, supplemental information and its other continuous disclosure filings. Investors, analysts and other interested parties can access Brookfield’s disclosure on Brookfield’s website under the Reports & Filings section at bam.brookfield.com.


CONSOLIDATED BALANCE SHEETS

Unaudited

 

 

June 30

 

 

December 31

(US$ MILLIONS)

 

 

 

2022

 

 

 

2021

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

2,084

 

 

$

393

Investments

 

 

 

27,050

 

 

 

4,943

Reinsurance funds withheld

 

 

 

4,861

 

 

 

4,650

Accrued investment income

 

 

 

247

 

 

 

21

Reinsurance related assets

 

 

 

604

 

 

 

169

Premiums due and other receivables

 

 

 

424

 

 

 

Deferred acquisition costs

 

 

 

1,111

 

 

 

776

Equity accounted investments

 

 

 

1,784

 

 

 

344

Investment properties

 

 

 

545

 

 

 

Deferred tax asset

 

 

 

469

 

 

 

20

Other assets

 

 

 

781

 

 

 

177

Separate account assets

 

 

 

1,059

 

 

 

Total assets

 

 

 

41,019

 

 

 

11,493

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

Future policy benefits

 

 

 

14,410

 

 

 

8,497

Policyholders' account balances

 

 

 

13,942

 

 

 

Policy and contract claims

 

 

 

1,734

 

 

 

Unearned premium reserve

 

 

 

1,089

 

 

 

Reinsurance payable

 

 

 

76

 

 

 

75

Other policyholder funds

 

 

 

321

 

 

 

Accounts payable and other liabilities

 

 

 

547

 

 

 

77

Due to related parties

 

 

 

331

 

 

 

467

Corporate borrowings

 

 

 

1,795

 

 

 

693

Subsidiary borrowings

 

 

 

1,495

 

 

 

Notes payable

 

 

 

159

 

 

 

Deferred revenue

 

 

 

79

 

 

 

82

Liabilities issued to reinsurance entities

 

 

 

215

 

 

 

167

Separate account liabilities

 

 

 

1,059

 

 

 

 

 

 

 

 

 

 

Junior preferred shares

 

 

 

2,459

 

 

 

Non-controlling interest

8

 

 

 

 

Class A exchangeable and Class B

539

 

 

 

539

 

Class C

761

 

 

1,308

 

896

 

1,435

Total liabilities and equity

 

 

$

41,019

 

 

$

11,493


CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited
For the periods ended June 30
(US$ millions, except per share amounts)

Three Months Ended

 

Six Months Ended

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net premiums and other policy revenue

$

1,454

 

 

$

50

 

 

$

1,768

 

 

$

52

 

Realized net investment income, including funds withheld

 

74

 

 

 

14

 

 

 

236

 

 

 

37

 

Unrealized net investment income

 

(244

)

 

 

25

 

 

 

(421

)

 

 

(61

)

Income from equity accounted investments

 

72

 

 

 

 

 

 

86

 

 

 

 

Total revenues

 

1,356

 

 

 

89

 

 

 

1,669

 

 

 

28

 

 

 

 

 

 

 

 

 

Benefits and claims paid on insurance contracts

 

284

 

 

 

15

 

 

 

419

 

 

 

26

 

Change in future policy benefits

 

907

 

 

 

64

 

 

 

923

 

 

 

(15

)

Interest credited to policyholders' account balances

 

5

 

 

 

 

 

 

5

 

 

 

 

Commissions for acquiring and servicing policies

 

62

 

 

 

 

 

 

62

 

 

 

 

Other reinsurance expenses

 

28

 

 

 

 

 

 

55

 

 

 

 

Changes in deferred acquisition costs

 

(52

)

 

 

 

 

 

(76

)

 

 

 

Operating expenses

 

81

 

 

 

7

 

 

 

98

 

 

 

10

 

Interest expense

 

34

 

 

 

 

 

 

43

 

 

 

 

Total benefits and expenses

 

1,349

 

 

 

86

 

 

 

1,529

 

 

 

21

 

Net income before income taxes

 

7

 

 

 

3

 

 

 

140

 

 

 

7

 

Income tax expense

 

(6

)

 

 

(1

)

 

 

(11

)

 

 

(2

)

Net income for the period

$

1

 

 

$

2

 

 

$

129

 

 

$

5

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Brookfield Asset Management Inc.1

 

 

 

 

2

 

 

 

 

 

 

5

 

Class A exchangeable & class B shareholders2,3

 

1

 

 

 

 

 

 

3

 

 

 

 

Class C shareholder2,3

 

2

 

 

 

 

 

 

128

 

 

 

 

Non-controlling interest

 

(2

)

 

 

 

 

 

(2

)

 

 

 

 

$

1

 

 

$

2

 

 

$

129

 

 

$

5

 

 

 

 

 

 

 

 

 

Net income per class A & class B share3

$

0.14

 

 

$

 

 

$

0.28

 

 

$

 

Net income per class C share2

$

0.06

 

 

$

 

 

$

4.99

 

 

$

 

  1. For the periods prior to June 28, 2021.

  2. For the period from June 28, 2021 onward.

  3. Class A and class B shares receive distributions at the same amount per share as the cash dividends paid on each Brookfield Class A Share.

SUMMARIZED FINANCIAL RESULTS

RECONCILIATION OF NET INCOME TO DISTRIBUTABLE OPERATING EARNINGS

Unaudited
For the periods ended June 30
US$ millions

Three Months Ended

 

Six Months Ended

 

2022

 

 

 

2021

 

 

2022

 

 

 

2021

Net income

$

1

 

 

$

2

 

$

129

 

 

$

5

Deferred income tax expense

 

7

 

 

 

1

 

 

11

 

 

 

Junior preferred shares dividends

 

11

 

 

 

 

 

11

 

 

 

Transaction costs

 

20

 

 

 

 

 

24

 

 

 

Equity accounted income

 

(34

)

 

 

 

 

(34

)

 

 

Depreciation

 

3

 

 

 

 

 

3

 

 

 

Mark-to-market on investments and reserves

 

38

 

 

 

 

 

(85

)

 

 

1

Distributable operating earnings1

$

46

 

 

$

3

 

$

59

 

 

$

6


RECONCILIATION OF EQUITY TO ADJUSTED EQUITY

Unaudited
As at June 30
US$ millions

 

 

2022

 

 

2021

Equity

$

1,308

 

$

1,252

Add:

 

 

 

Preferred shares

 

2,459

 

 

Adjusted Equity1

$

3,767

 

$

1,252

  1. Non-IFRS measure - see Non-IFRS and Performance Measures on page 6.


Additional Information

Brookfield Reinsurance was established on December 10, 2020 by Brookfield and on June 28, 2021 Brookfield completed the spin-off of the company, which was effected by way of a special dividend, to holders of Brookfield's Class A and B Shares. This financial information provides comparative information of the business included within the spin-off (“the Business”) for the periods prior to the spin-off, as previously reported by Brookfield. Accordingly, the financial information for the periods prior to June 28, 2021 is presented based on the historical financial information for the Business as previously reported by Brookfield. Therefore, net income (loss) and comprehensive income (loss) not attributable to interests of others in operating subsidiaries has been allocated to Brookfield prior to June 28, 2021 and allocated to the shareholders of class A exchangeable shares, class B shares and class C shares on and after June 28, 2021.

The statements contained herein are based primarily on information that has been extracted from our financial statements for the quarter ended June 30, 2022, which have been prepared using International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

Brookfield Reinsurance’s Board of Directors have reviewed and approved this document, including the summarized unaudited consolidated financial statements prior to its release.

Information on our distributions can be found on our website under Stock & Distributions/Distribution History.

Brookfield Asset Management Reinsurance Partners Ltd. (NYSE, TSX: BAMR) operates a leading financial services business providing capital-based solutions to the insurance industry. Each class A exchangeable limited voting share of Brookfield Reinsurance is exchangeable on a one-for-one basis with a class A limited voting share of Brookfield Asset Management Inc. (NYSE: BAM; TSX: BAM.A). For more information, please visit our website at bamr.brookfield.com or contact:

Communications & Media:
Kerrie McHugh
Tel: (212) 618-3469
Email: kerrie.mchugh@brookfield.com

Investor Relations:
Rachel Powell
Tel: (416) 956-5141
Email: rachel.powell@brookfield.com

Non-IFRS and Performance Measures

This news release and accompanying financial statements are based on IFRS, as issued by the IASB, unless otherwise noted.

We make reference to distributable operating earnings. We define distributable operating earnings as net income excluding the impact of depreciation and amortization, income taxes, income from equity accounted investments, mark-to-market on investments and derivatives, breakage and transaction costs, and is inclusive of our share of adjusted earnings from our investments in associates. Distributable operating earnings is a measure of operating performance. We use distributable operating earnings to assess our operating results. We also make reference to Adjusted Equity. Adjusted Equity represents the total economic equity of our Company through its Class A, B, and C shares and the Junior Preferred Shares issued by our Company. We use Adjusted Equity to assess our return on our equity.

We provide additional information on key terms and non-IFRS measures in our filings available at bamr.brookfield.com.

Notice to Readers

Brookfield Reinsurance is not making any offer or invitation of any kind by communication of this news release and under no circumstance is it to be construed as a prospectus or an advertisement.

This news release contains “forward-looking information” within the meaning of Canadian provincial securities laws and “forward-looking statements” within the meaning of Canadian provincial securities laws and “forward-looking statements” within the meaning of the U.S. Securities Act of 1933, the U.S. Securities Exchange Act of 1934, and “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 and in any applicable Canadian securities regulations. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements which reflect management’s expectations regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of Brookfield Reinsurance and its subsidiaries, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods. Particularly, statements regarding future capital markets initiatives, including statements relating to the redeployment of capital into higher yielding investments, constitute forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “expects,” “anticipates,” “plans,” “believes,” “estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” In particular, the forward-looking statements contained in this news release include statements referring to the future state of the economy or the securities market and expected future deployment of capital and financial earnings. Although we believe that our anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, which may cause the actual results, performance or achievements of Brookfield Reinsurance to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: (i) investment returns that are lower than target; (ii) the impact or unanticipated impact of general economic, political and market factors in the countries in which we do business including as a result of COVID-19 and the related global economic shutdown; (iii) the behavior of financial markets, including fluctuations in interest and foreign exchange rates; (iv) global equity and capital markets and the availability of equity and debt financing and refinancing within these markets; (v) strategic actions including dispositions; the ability to complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits; (vi) changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates); (vii) the ability to appropriately manage human capital; (viii) the effect of applying future accounting changes; (ix) business competition; (x) operational and reputational risks; (xi) technological change; (xii) changes in government regulation and legislation within the countries in which we operate; (xiii) governmental investigations; (xiv) litigation; (xv) changes in tax laws; (xvi) ability to collect amounts owed; (xvii) catastrophic events, such as earthquakes, hurricanes and epidemics/pandemics; (xviii) the possible impact of international conflicts and other developments including terrorist acts and cyberterrorism; (xix) the introduction, withdrawal, success and timing of business initiatives and strategies; (xx) the failure of effective disclosure controls and procedures and internal controls over financial reporting and other risks; (xxi) health, safety and environmental risks; (xxii) the maintenance of adequate insurance coverage; (xxiii) the existence of information barriers between certain businesses within our asset management operations; (xxiv) risks specific to our business segments including our real estate, renewable power, infrastructure, private equity, and other alternatives, including credits; and (xxv) factors detailed from time to time in our documents filed with the securities regulators in Canada and the United States.

We caution that the foregoing list of important factors that may affect future results is not exhaustive and other factors could also adversely affect its results. Readers are urged to consider the foregoing risks, as well as other uncertainties, factors and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such forward-looking information. Except as required by law, Brookfield Reinsurance undertakes no obligation to publicly update or revise any forward-looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise.

Past performance is not indicative nor a guarantee of future results. There can be no assurance that comparable results will be achieved in the future, that future investments will be similar to the historic investments discussed herein (because of economic conditions, the availability of investment opportunities or otherwise), that targeted returns, diversification or asset allocations will be met or that an investment strategy or investment objectives will be achieved.

Certain of the information contained herein is based on or derived from information provided by independent third-party sources. While Brookfield Reinsurance believes that such information is accurate as of the date it was produced and that the sources from which such information has been obtained are reliable, Brookfield Reinsurance does not make any representation or warranty, express or implied, with respect to the accuracy, reasonableness or completeness of any of the information or the assumptions on which such information is based, contained herein, including but not limited to, information obtained from third parties.