New owners of AIG’s Bermuda legacy unit Fortitude Re plot growth and diversification
Fortitude Re, one of Bermuda’s largest multiline reinsurers originally formed by AIG to manage its legacy business, has been acquired by a group of investors which now plan to grow and diversify the business the acquisition of further runoff blocks over time.
The Carlyle Group and T&D Holdings have acquired a 76.6 percent stake in Fortitude Group Holdings, whose group companies include Fortitude Re. At closing, AIG received approximately $2.2 billion in sale proceeds, including the purchase price of $1.8 billion along with additional consideration paid in accordance with the terms of the purchase agreement.
Ownership interest in Fortitude Re post-closing is as follows: Carlyle and a newly created Carlyle-managed fund hold 71.5 percent, which includes a 19.9 percent stake acquired by Carlyle in November 2018, T&D holds 25 percent and AIG holds 3.5 percent.
Formed in 2016 by AIG to manage its legacy business, Fortitude Re is the reinsurer of approximately $30 billion of reserves from AIG’s Legacy Life and Retirement Run-Off Lines and approximately $4 billion of reserves from AIG’s Legacy General Insurance Run-Off Lines related to business written by multiple wholly-owned AIG subsidiaries.
Fortitude Re will have access to a $550 million syndicated credit facility post deal. The business has also secured an insurer financial strength rating from Fitch to tie in with its new independence. The rating agency has given it a rating of BBB+.
James Bracken, CEO 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. 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.”
Brian Duperreault, AIG’s CEO, said, “Closing this transaction marks the completion of a significant milestone in AIG’s strategy to efficiently manage our legacy liabilities while strengthening our balance sheet and upholding our commitments to regulators and policyholders. Fortitude Re will continue to be an important partner for AIG, and I would like to thank colleagues across AIG and everyone who has worked diligently towards today’s announcement.”
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. We thank AIG and T&D for their continued partnership and look forward to working together to drive value for all of Fortitude Re’s stakeholders.”
Hirohisa Uehara, T&D’s representative director and 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. T&D will focus on supporting Fortitude Re by contributing our expertise in life insurance business in Japan to create synergies with our domestic life insurance business as well as to diversify our business portfolio. We look forward to working together with Fortitude Re, AIG and Carlyle in the closed block business.”
