Brookfield Reinsurance .(BNRE_A) - 2021 Q4 - Annual Report

Financial Performance - Gross premiums increased by $6.8 billion in 2021 compared to 2020, driven by two large-block reinsurance transactions and a higher volume of pension risk transfer (PRT) deals [220]. - The company reported a net loss of$ 44 million for the year ended December 31, 2021, compared to net income of $1 million in 2020 [219]. - Distributable Operating Earnings (DOE) increased by$ 29 million to $30 million in 2021, with$ 5 billion of assets deployed from reinsurance and PRT transactions [222]. - Total assets grew to $11.493 billion as of December 31, 2021, up from$ 1.440 billion in 2020, primarily due to new PRT deals and reinsurance transactions [228]. - Cash generated from operating activities was $1.6 billion in 2021, compared to$ 399 million in 2020, mainly due to favorable changes in insurance reserves [241]. - Cash used in investing activities was $3.9 billion in 2021, primarily for additional assets acquired from reinsurance transactions [243]. - Cash generated from financing activities was$ 2.6 billion in 2021, significantly up from $13 million in 2020, mainly from the issuance of shares [245]. - Distributable Operating Earnings for 2021 were$ 30 million, a significant increase from $1 million in 2020 [304]. Investment and Asset Management - Net investment income, including funds withheld, rose by$ 54 million in 2021, reflecting growth in the investment portfolio and realized gains from the first large-block reinsurance transaction [220]. - Assets Under Management (AUM) grew by $8.6 billion to$ 9.7 billion, driven by new Reinsurance and Pension Risk Transfer (PRT) business [232]. - Cash and cash equivalents increased by $358 million during the year, primarily from cash held within investment portfolios of new reinsurance treaties [228]. - Equity accounted investments increased to$ 344 million, related to the company's investment in American Equity Investment Life Holding Company [229]. - Corporate borrowings rose by $693 million, primarily from drawings on a 364-day revolving credit facility for investment opportunities [232]. Insurance Operations - Insurance reserves increased by$ 7.2 billion in 2021, attributed to $6.2 billion from new reinsurance transactions and$ 1.1 billion from new PRT deals [231]. - The company closed 26 PRT deals in 2021, representing approximately 20% of the Canadian PRT market [220]. - The company closed 26 PRT deals in 2021, representing $1.1 billion of premiums and approximately 20% of the Canadian PRT market [237]. - Deferred revenue increased by$ 82 million due to a negative ceding commission from a reinsurance transaction [232]. Market Conditions and Trends - The Canadian Pension Risk Transfer market has expanded at a growth rate of approximately 24% per annum since 2015, indicating significant growth opportunities [254]. - The life insurance and annuities industry in North America and Western Europe has over $13 trillion in assets, growing at approximately 4% annually [255]. - Insurers are facing pressure on profitability due to declining yields from fixed income products, creating opportunities for higher-yielding alternative investments [255]. - Recent market conditions have exposed under-capitalized companies, increasing the need for capital support, which the reinsurance market can provide [255]. - Public market valuations for insurers have compressed, with many trading at cyclical lows on a book value basis, prompting partnerships for capital solutions [255]. Risk Management - The company manages interest rate risk through asset liability management (ALM), using derivatives to match the effective and key rate durations of the investment portfolio with insurance reserves [259]. - Credit risk is managed by establishing concentration limits by counterparty, credit rating, and asset class, with regular monitoring of counterparties' financial conditions [260]. Corporate Governance - The board meets at least four times each year, with additional meetings held as necessary to address specific business items [331]. - The board is responsible for overseeing the company's long-term strategic planning process and reviewing its annual business plan [337]. - The Governance and Nominating Committee does not support mandatory retirement age or term limits for directors, focusing instead on board renewal and fresh perspectives [338]. - Directors are required to disclose any interest in contracts or transactions with the company to the full board [339]. - The company has adopted a majority voting policy for the election of directors, requiring a majority of votes in favor for a nominee to be elected [335]. - The Audit Committee is responsible for monitoring financial reporting systems and internal controls, and reviews quarterly and annual financial statements [347]. - The Governance and Nominating Committee maintains an "evergreen" list of candidates to ensure quick identification of nominees for board vacancies [348]. - The Compensation Committee evaluates executive compensation to ensure it aligns with the company's risk profile and does not encourage excessive risk-taking [351]. Executive Compensation - For the year ended December 31, 2021, directors received approximately$ 300,000 in aggregate compensation for all services to the company and its subsidiaries [327]. - During 2021, named executive officers (NEOs) received approximately $4.4 million in aggregate compensation paid by the company for all services [329]. - The Chief Executive Officer, Chief Investment Officer, and the Chief Executive Officer of the reinsurance business are employees of Brookfield, and their compensation is determined by Brookfield [329]. - The company does not have any equity compensation plans authorized for issuance, but NEOs may participate in Brookfield's long-term incentive plans at Brookfield's discretion [329]. Compliance and Ethics - The company has adopted a Code of Business Conduct and Ethics, which all employees must acknowledge annually [357]. - The services provided under the Administration Agreement are on a cost-recovery basis, including support for financial reporting and investor relations [358].