Consortium buys majority stake in Fortitude Re
A $2.2 billion deal to secure a majority interest in Bermudian-based multi-line reinsurance company Fortitude Re has been completed.
Institutional investors The Carlyle Group and T&D Holdings have completed the acquisition of a 76.6 per cent interest in Fortitude Group Holdings, which includes Fortitude Re, from American International Group.
AIG received about $2.2 billion in sale proceeds, which includes the $1.8 billion purchase price and additional consideration in accordance with the purchase agreement. The transaction was first announced in November. It closed following the receipt of regulatory approvals.
Fortitude Re is the reinsurer of approximately $30 billion of reserves from AIG's legacy life and retirement run-off lines and about $4 billion of reserves from AIG's legacy general insurance run-off lines related to subsidiaries.
James Bracken, chief executive officer of Fortitude Re, said: “The sale of Fortitude Re represents an important step for the company and we look forward to the future. We have strong support from our new ownership and are well-positioned to become a lead provider of bespoke runoff solutions for life & annuity and P&C businesses.”
Brian Duperreault, AIG's CEO, called the transaction a significant milestone in AIG's strategy to manage its legacy liabilities while strengthening its balance sheet.
Kewsong Lee, Carlyle's co-CEO, said: “Our partnership with Fortitude Re represents an important strategic investment that is focused on growing the platform to bring innovative solutions to the insurance industry. Fortitude Re has performed remarkably well in the current environment thanks to its robust risk management, and we believe it is well-positioned to deliver sustainable growth and profitability.”
Hirohisa Uehara, T&D's president, said: “Despite increasing uncertainty due to the Covid-19 outbreak around the globe, the successful completion of this transaction is significantly meaningful for T&D and a strategically important step towards continued growth of Fortitude Re and our future business collaboration.”
Carlyle and a newly created Carlyle-managed fund now hold 71.5 per cent of ownership in Fortitude Re, which includes a 19.9 per cent interest acquired in 2018, while T&D holds 25 per cent, and AIG holds a 3.5 per cent.
Following the acquisition, Fitch Ratings assigned an insurer financial strength rating of BBB+ to Fortitude Re, and a long-term default rating of BBB to its holding company. The rating outlook is stable.
Mr Bracken, commenting on the rating and new $550m syndicated credit facility, said: “The rating is a testament to our strength and position as Bermuda's largest multi-line reinsurer, and confirms our ability to manage insurance and related risk. The credit facility provides strength to our balance sheet and protection to our clients and other stakeholders.”