Brookfield Reinsurance Ltd. — 2023 Annual Report Summary
Entity and period: The supplied filing is Brookfield Reinsurance Ltd.’s Form 20-F for the fiscal year ended December 31, 2023, filed March 27, 2024. It is an annual report, not a standalone 2023 Q4 earnings report; quarterly results are not clearly provided. The filing is for Brookfield Reinsurance Ltd., not a registrant identified as Brookfield Wealth Solutions Ltd. Financial figures are in U.S. dollars and use U.S. GAAP.
Business context
The company provides life insurance and annuities, property and casualty insurance, annuity reinsurance, and pension risk transfer (PRT) solutions through Direct Insurance, Reinsurance, and PRT segments. Its investment approach is to match insurance liabilities with investments, including alternative assets sourced through Brookfield. American National is a core direct-insurance platform; Argo joined the group in November 2023.
Key financial metrics
| Metric (US$ millions unless noted) | 2023 | 2022 |
|---|---|---|
| Total revenue | 7,020 | 4,309 |
| Net income | 797 | 501 |
| Net income attributable to shareholders | 796 | 499 |
| Distributable Operating Earnings (non-GAAP) | 745 | 388 |
| Net cash from operating activities | 1,507 | 644 |
| Net cash used in investing activities | (1,809) | (4,878) |
| Net cash from financing activities | 2,465 | 5,994 |
| Total assets | 61,643 | 43,458 |
| Total liabilities | 52,794 | 39,193 |
| Total equity | 6,155 | 1,685 |
| Adjusted equity (non-GAAP) | 8,969 | 4,788 |
| Corporate and subsidiary borrowings | 3,569 | 3,652 |
| Cash and cash equivalents | 4,308 | 2,145 |
Revenue increased about 63% and net income about 59% year over year. The filing attributes earnings growth to business expansion, higher-yielding investment deployments, a full year of American National contribution, and Argo. The filing does not provide a clear consolidated operating-margin measure; DOE is a non-GAAP performance metric and should not be treated as a GAAP margin.
Reported segment DOE was $576 million for Direct Insurance, $155 million for Reinsurance, and $43 million for PRT; corporate activities and reconciliation items mean segment DOE does not equal consolidated DOE. Direct Insurance P&C results faced higher catastrophe losses.
Liquidity, capital, and balance sheet
At year-end, total liquidity was $26.955 billion, including $4.308 billion of consolidated cash, $21.927 billion of liquid financial assets, and $720 million of undrawn credit facilities. Corporate liquidity was lower, at $1.010 billion, including only $78 million of unrestricted corporate cash and $212 million of corporate liquid financial assets. Much of total liquidity resides in regulated insurance subsidiaries and may be restricted. Management said liquidity was sufficient for foreseeable requirements.
Brookfield had provided a $2.0 billion undrawn equity commitment; the Brookfield revolving facility was $400 million and undrawn. External revolving facilities totaled $750 million, with $430 million drawn. A separate $1.0 billion investment-warehousing facility had $776 million outstanding, and a $500 million secured facility was fully drawn. The company reported compliance with financial covenants and insurance capital requirements. U.S. insurance subsidiaries exceeded 300% of authorized control-level RBC requirements.
Subsidiaries had $5.4 billion of outstanding investment commitments at year-end, versus $2.8 billion in 2022, and $941 million of letters of credit. Corporate borrowings included $1.276 billion due within one year. These obligations, liquidity restrictions, and the distinction between corporate and regulated-entity liquidity merit attention.
Material changes and unusual items
- Argo acquisition: Closed November 16, 2023 for approximately $1.1 billion in cash. Argo contributed $191 million of revenue and $1 million of net profit from closing through year-end. Acquisition accounting remained provisional; a $51 million bargain-purchase gain was deferred pending final valuation, expected by Q4 2024.
- AEL transaction: The proposed acquisition of the remaining American Equity Investment Life Holding Company (AEL) shares was expected to close in the first half of 2024, subject to customary conditions and regulatory approvals. Consideration was $38.85 cash plus Brookfield Asset Management shares valued at $16.15 per AEL share. Brookfield Reinsurance held about 20% of AEL before closing. The AEL flow reinsurance arrangement was suspended effective October 1, 2023, in anticipation of the acquisition.
- Exchange offer and capital contributions: The company issued 32.9 million Class A-1 exchangeable shares in exchange for the same number of Brookfield Class A shares in November 2023. Brookfield also contributed approximately $2.1 billion in financial assets for Class C shares.
- Investment and disposition effects: Investment-related gains were $534 million, compared with losses of $185 million in 2022; the filing cites gains on equity securities and short-term investments as key drivers. The December sale of a health-insurance business generated a $33 million pretax gain after transaction costs.
- Accounting change: The company adopted U.S. GAAP and long-duration targeted improvements (LDTI) for 2023, retrospectively transitioning comparative periods to U.S. GAAP. LDTI adoption reduced opening retained earnings by $1 million and accumulated other comprehensive income by $135 million.
Outlook, commentary, and risks
The filing offers no specific earnings or revenue guidance. Management cited potential growth opportunities in annuity reinsurance, PRT, and providing capital solutions to insurers, while emphasizing access to Brookfield’s investment platform and alternative-credit strategies. The AEL acquisition remained conditional at the report date.
Principal risks include inaccurate insurance pricing or reserves; policyholder lapse, mortality, and longevity experience; investment valuation, credit, concentration, and liquidity risks; interest-rate and credit-spread changes; counterparty performance; catastrophe and climate-related losses; intense competition; cybersecurity and third-party service-provider incidents; regulatory capital and dividend restrictions; and execution, integration, and approval risks for acquisitions. Brookfield’s investment-management, administrative, and financing relationships also create conflicts-of-interest and related-party risks.
Argo’s ratings were under review/developing at A.M. Best and negative at S&P as of year-end. Bermuda’s enacted tax regime is expected to impose a 15% corporate income tax on the relevant group beginning in 2025; the company recognized a $35 million deferred tax asset related to the new regime. Management reported effective disclosure controls and internal control over financial reporting, but the control assessment excluded Argo, representing 14% of year-end assets and 3% of annual revenue.
Most important facts for investors to verify
- Confirm AEL acquisition closing, final consideration and share issuance, regulatory approvals, and the consequences of any delay or failure to close.
- Review Argo’s final purchase-price allocation, the provisional $51 million deferred bargain-purchase gain, and subsequent rating developments.
- Reconcile corporate liquidity with total liquidity and assess accessibility of regulated-entity assets against near-term debt maturities, investment commitments, and letters of credit.
- Examine investment gains, unrealized losses, valuation assumptions, and credit exposures, including real estate, private loans, and Level 3 assets.
- Assess reserve sensitivity to mortality, lapse, longevity, and P&C claims assumptions, including the $7.3 billion policy-and-contract-claims liability.
- Evaluate the 2025 Bermuda tax impact, Brookfield related-party arrangements and conflicts, and the effects of 2023 accounting and LDTI changes on comparability.