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Carlyle Group & T&D acquire majority share in Fortitude Re from AIG

3rd June 2020 - Author: Luke Gallin

The Carlyle Group and T&D Holdings have completed their previously announced acquisition of a 76.6% interest in Fortitude Group Holdings, whose group companies include Fortitude Re, from AIG.

handshakeFirst announced in November of last year, the deal has now closed following the receipt of regulatory approvals and customary closing conditions.

Upon closing, AIG received approximately $2.2 billion in sale proceeds, including the purchase price of $1.8 billion as well as additional consideration paid in accordance with the terms of the purchase agreement.

Fortitude Re reinsures roughly $30 billion of reserves from AIG’s Legacy Life and Retirement Run-Off Lines and around $4 billion of reserves from the company’s Legacy General Insurance Run-Off Lines related to business written by numerous subsidiaries of AIG.

AIG’s Chief Executive Officer (CEO), Brian Duperreault, commented: “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.”

The transaction sees Fortitude Group Holdings launch as an independent provider of run-off management solutions, backed by a long-term shareholder base and a solid capital position.

Post-closing, Carlyle and a newly created Carlyle-managed fund hold a 71.5% interest in Fortitude Re, which includes the 19.9% share acquired in November 2018, while T&D holds a 25% share and AIG a 3.5% share in the reinsurer.

Hirohisa Uehara, T&D’s Representative Director and President, added: “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.”

“The sale of Fortitude Re represents an important step for the company and we look forward to the future,” James Bracken, CEO of Fortitude Re further explained. “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.”

Fortitude Re has received a ‘BBB+’ Financial Strength rating from Fitch and its holding company has a ‘BBB’ Issuer Default Rating as well.

In addition, Fortitude Re has secured a new $550 million syndicated credit facility to provide further funding to help drive growth.

“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,” Bracken explained.

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