Fortitude Re was formed as a Bermuda domiciled composite reinsurer in 2017 by AIG to house the latter’s legacy portfolio
AIG will bring down its stake in Fortitude Re to 3.5%. Photo: courtesy of HanSangYoon/Wikipedia.org.
American International Group (AIG) has agreed to sell a stake of 76.6% in Fortitude Group, a group of companies that operate as Fortitude Re, to The Carlyle Group and T&D Holdings for about $1.8bn.
Fortitude Re (previously known as DSA Re) was formed as a Bermuda domiciled composite reinsurer in 2017 by AIG to house the latter’s legacy portfolio in a separate and distinct capitalized balance sheet. The legacy portfolio was made up of insurance reserves related to AIG’s discontinued lines of commercial property and casualty, and life insurance businesses.
Following the closing of the deal, Carlyle and its fund investors will hold 71.5% stake in Fortitude Re. Carlyle, which is acquiring the stake through a newly created fund, already has a 19.9% stake in the reinsurance business in a deal closed in November 2018.
T&D, which is a Japanese life insurance company, is acquiring a stake of 25% in the composite reinsurer for $586m.
T&D representative director and president Hirohisa Uehara said: “We are really honored to invest in Fortitude Re, which has developed a sophisticated platform for managing life and P&C insurance liabilities.
“We have longstanding relationships with both AIG and Carlyle, and we believe Fortitude Re’s closed book business will contribute significant synergies to our domestic life insurance business as well as diversification of our business portfolio.”
AIG will continue to take part in the Fortitude Re business with a stake of 3.5%. The US insurer will be entitled to a $500m non-pro-rata distribution, which if not paid by the later of 13 May 2020 or transaction close will lead to an additional payment from the new Carlyle-managed fund and T&D based on their ownership interest in the reinsurance business.
Transaction to help in making Fortitude Re into an independent company
The transaction is said to advance AIG’s and Carlyle’s efforts to make Fortitude Re as a standalone company and make it into a premier provider of retroactive reinsurance and legacy run-off management solutions.
With the support of its three stakeholders, the Bermudian reinsurance company will pursue acquisitions across the world and handle legacy insurance portfolios.
Carlyle co-CEO Kewsong Lee said: “This transaction demonstrates Carlyle’s strategy of developing scalable platforms to drive shareholder value. Fortitude Re, led by CEO James Bracken, is strongly positioned as an industry leader in managing run-off insurance liabilities, and Carlyle looks forward to partnering with the management team to help Fortitude Re grow.”
Subject to regulatory approvals and other customary closing conditions, the deal is anticipated to be completed in mid-2020.