Brookfield moves reinsurance money for majority stake in private debt firm

Brookfield moves reinsurance money for majority stake in private debt firm | Insurance Business New Zealand

Reinsurance

Brookfield moves reinsurance money for majority stake in private debt firm

Deal will help deploy some of its significant cash on balance sheet

Reinsurance

By
Kenneth Araullo

Brookfield Asset Management has entered a partnership with Castlelake LP, securing a majority of the private debt firm’s fee-related earnings.

The deal, valued at approximately $1.5 billion, marks a significant step in the Canadian investment powerhouse’s strategic expansion of its credit operations.

As part of the investment, Brookfield’s reinsurance division (Brookfield Reinsurance) will also allocate funds into Castlelake’s strategies. That said, despite the new arrangement, Castlelake maintains its autonomy and continues to hold the majority of earnings linked to its performance.

Recently, the Toronto-headquartered Brookfield Asset Management established a credit division aimed at bolstering growth parallel to its existing real estate and infrastructure ventures.

The company explained that it is intensifying its management of credit assets, including those of its own insurance operations, often through strategic partnerships.

RBC Capital Markets analyst Geoffrey Kwan noted the transaction “helps to deploy some of its significant cash ($2.7 billion) on its balance sheet and we think there could be an opportunity to take a greater stake in Castlelake over time.”

Brookfield’s stock saw an increase of 1.2% on the New York Stock Exchange following the announcement.

The move into private credit comes at a time when rising interest rates have escalated borrowing costs, prompting alternative asset managers to venture beyond traditional buyouts.

This trend has stimulated a surge in private credit, stepping in to fill gaps left by conventional banks. Private equity firms are increasingly acquiring stakes in insurance companies to steer their investment strategies and expand their financial reserves.