AIG sells majority stake in island reinsurer
American International Group has sold a majority stake in its Bermudian legacy reinsurer Fortitude Re.
The deal involves private-equity group Carlyle Group and Japanese insurer T&D Holdings partnering to pay $1.8 billion for a 76.6 per cent stake in Fortitude, whose headquarters is in the AIG building on Richmond Road.
In a statement, Carlyle said it was looking forward to working with the existing management team at Fortitude, which was set up by AIG in 2017 under the name of DSA Re.
Its initial role was to house AIG’s legacy portfolio comprising insurance reserves associated with discontinued lines of commercial property and casualty and life insurance business.
The company has evolved to write third-party business, providing reinsurance and run-off management solutions.
The company has about more than $40 billion of invested assets and over $35 billion in reserves.
Brian Duperreault, AIG’s chief executive officer, said the deal represented “another important step in our strategy to efficiently manage our legacy liabilities by further preparing Fortitude Re for independence, while strengthening our balance sheet and maintaining our primary focus on upholding policyholder and regulatory commitments”.
He added: “Carlyle’s expertise in separating and standing up companies has been invaluable to date, and we look forward to working with their team and T&D, with whom we have a longstanding relationship in Japan, as we continue the separation process.
“I also want to thank the entire Fortitude Re team for all their hard work in building the organisation. We look forward to their future success.”
Carlyle first purchased a 19.9 per cent stake in Fortitude Re a year ago and after the deal just announced closes, its stake will increase to 71.5 per cent, while T&D will own 25 per cent and AIG 3.5 per cent.
AIG is also due to receive a $500 million distribution due to be paid by May 13 next year or when the transaction closes, whichever is later.
The transaction will enhance Carlyle’s ability to support Fortitude Re’s growth plans, provide Fortitude Re access to Carlyle’s wide array of investment strategies and position it for long-term success.
T&D brings additional industry and international expertise to develop Fortitude Re’s strategically differentiated capabilities. With the backing of Carlyle, T&D and AIG, Fortitude Re will pursue global opportunities to successfully acquire and manage legacy insurance portfolios.
Kewsong Lee, Carlyle’s co-chief executive officer, 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.
“We are excited about the prospects of further developing our global investment management services for Fortitude Re as we work to deliver attractive returns across a variety of asset classes.
“We welcome T&D to our partnership with AIG, both of whom are highly experienced players in insurance, and look forward to creating an attractive investment opportunity for our fund investors.”
Hirohisa Uehara, T&D’s representative director and president, said: “We are really honoured 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.
“Additionally, we look forward to supporting Fortitude Re’s growth by leveraging our years of experience as a Japanese life insurer.”
The transaction is expected to close in mid-2020, subject to required regulatory approvals and other customary closing conditions.
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