(Bloomberg) -- American Equity Investment Life Holding Co. plunged the most in more than two years after a Brookfield Asset Management Inc. executive resigned from its board in a dispute over an investment in a firm being launched by Josh Harris, according to people familiar with the matter. 

Sachin Shah, chief executive officer of Brookfield Asset Management Reinsurance Partners Ltd., said in a letter he was stepping down from American Equity’s board because of a “fundamental change in the strategic direction of the company” and “a material departure from the AEL 2.0 strategy.” He didn’t give further details. 

The disagreement is over American Equity’s decision to make an equity investment in 26North Partners, a new asset manager founded and led by Harris, the people said, asking not be identified because the matter is private. Harris co-founded Apollo Global Management Inc.

“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 in the letter, a copy of which was filed with regulators. Brookfield Asset Management is American Equity’s largest shareholder, with an 18.5% stake.  

Brookfield Asset Management demanded that American Equity register to allow it to sell as many as 9.1 million shares, or about 57% of its overall holdings.

Brookfield and Shah have raised concerns about the higher risk associated with investing in a startup for American Equity’s shareholders and policyholders, the people said.

“We appreciate Mr. Shah’s contribution to the board of AEL and are sad to lose him as a director,” American Equity said in a statement emailed by a spokesperson. 

“The transactions with 26North are consistent with our AEL 2.0 strategy which we first announced in October 2020. The equity investment into 26North is similar to arrangements we have with multiple other asset managers that are generating value and alignment for all our shareholders and policyholders,” the company added. 

A representative for Brookfield declined to comment beyond Shah’s letter.

West Des Moines, Iowa-based American Equity fell as much as 33% in trading Tuesday. The shares closed down 21.5% at $32.99 in New York, the biggest drop since March 2020.

American Equity’s AEL 2.0 strategy prioritized increasing the yield on new investments from 3.5% to more than 4% to keep the business profitable in a low-rate environment, according to an October 2020 presentation. The initiative called for the creation of a diversified portfolio through partnerships and joint ventures with asset managers. 

‘Great Pedigree’

On Monday, American Equity said third-quarter results were helped by “continued execution” of AEL 2.0, with private-asset allocation growing to 18.4% of its investment portfolio. 

Anant Bhalla, American Equities’ chief executive officer, told analysts Tuesday the investment in 26North is “modest.” His company isn’t able to start an asset manager from scratch on its own, so partnering with Harris made sense, Bhalla said, adding that he was unaware of Shah’s letter prior to the conference call. 

“AEL hopes to source future assets from this venture 26North that has got a lot of talent flocking to it, a great pedigree in terms of Mr. Harris building businesses over time and being one of the foremost private equity investors in a generation,” he said on the call.

Brookfield and American Equity struck a strategic partnership in October 2020 establishing Brookfield as a reinsurance counterparty for the US firm. 

Shah also serves as Brookfield Asset Management’s chief investment officer and CEO of Brookfield’s Insurance Solutions business.

(Updates with additional details in fifth paragraph.)

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