Fortitude Re can double in size over several years on $2.1bn equity boost

Fortitude RE can double in size following the major $2.1 billion capital injection just received, a key shareholder has said.

“We believe it is sufficient to double the size of Fortitude Re today,” the head of Carlyle Insurance Solutions, Brian Schreiber (pictured), told an investor call. “We have a deep pipeline of opportunities and we think this is just the beginning.”

Lead Fortitude Re’s lead shareholder Carlyle organized the $2.1 billion in new equity for its Bermuda-based reinsurer. Carlyle put down only $150 million from its own balance sheet, thus diluting its stake from the initial 19.9% to 10.5%, officials noted. Carlyle indirectly controls a majority stake via funds it manages.

“That [equity], with just a little bit of leverage, allows that business the firepower to go and essentially double its business in a short period of time.”

Comments came after announcement of a $4 billion annuity reinsurance transaction with Taiyo Life Insurance Company, but before announcement of a massive $31 billion reinsurance deal with Prudential.

Fortitude's total firepower will exceed even that doubling, given earnings power.  “Keep in mind, Fortitude does generate excess capital and we do have other sources available.”

Deployment could start soon, but still take several years to roll-out in full.  “Some of the deals we are looking at could be challenging.... but given our success rate and deals in the pipeline, we feel that that capital will get deployed over the next couple of years,” Schreiber said.

Carlyle’s ambitions have a sky-is-the-limit feel.  “We think it is a multi-trillion-dollar opportunity,” Schreiber said, citing $1 trillion likely in Asia, a higher sum in North America and an unspecified outlook for Europe. “So it is big.”

With insurers creating future legacy liabilities every day, “it is not as if there is a finite amount.”

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