Why American Equity Investment Life Stock fell 14% this week


What happened

Investment in American shares Life Holding (AEL 4.69%) The stock has had a volatile week, falling 14% from last Friday’s close at 1:45 p.m. ET today, according to data from S&P Global Market Intelligence. Shares jumped 3.1% for the day at the same time, giving them positive momentum to end the week. The stock is down 8% since the start of the year.

It lagged the major indexes as the Dow Jones Industrial Average increased by 3.9%, the S&P500 increased by 5.6%, and the Nasdaq jumped 8% for the week from Friday afternoon.

So what

American Equity Investment Life is a life insurer and annuity provider, which specializes in fixed index annuities. It had a wild week, posting third-quarter earnings on Monday that beat analysts’ estimates with adjusted earnings per share of $0.99, up from $1.46 per share a year ago.

But it was news the next day, November 8, that sent the stock price down some 31% between the Monday market close and Tuesday afternoon. The sale was due to the resignation of board member Sachin Shah, CEO of Brookfield Asset Management Reinsurance Partnersof American Equity’s board of directors following a disagreement over the company’s strategic direction.

“It is clear, based on recent events, that there has been a fundamental shift in the strategic direction of the company, and this shift in my view represents a significant departure from the AEL 2.0 strategy,” said Shah wrote in his resignation letter, according to the Filing with the Securities and Exchange Commission (SEC). “As previously communicated, neither I nor Brookfield Reinsurance can support this change in strategy as being in the best interests of the company, its policyholders or its shareholders.” Shah said Brookfield will not name a replacement.

Bloomberg first reported the news on Tuesday, saying the dispute centered on American Equity’s Nov. 8 announcement that it was acquiring a stake in 26North Partners, an investment firm run by Josh Harris that offers private equity, credit, insurance and reinsurance products and solutions. .

Now what

Brookfield Asset Management Reinsurance is the largest investor in US stocks, with an 18% stake in the company. In the filing with the SEC, Brookfield requests “a resale registration statement” to sell about 9.1 million of its shares, or about 57% of its holdings in the company.

US stocks were able to rebound from those lows on Tuesday as the stock pushed higher on Thursday’s good inflation report. Also on Thursday, American Equity’s board approved a $400 million investment share buyback planin line with an effort to improve the share price.

All in all, a busy week. Investors have a lot to unpack here, and there are obviously differing views on the company’s strategic direction. Better watch where things go from here.

David Kovalesky has no position in the stocks mentioned. The Motley Fool holds positions and recommends Brookfield Asset Management Reinsurance Partners Ltd. The Motley Fool has a disclosure policy.


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