The Carlyle Group and T&D have reached an agreement to purchase a 76.6% stake in Fortitude Re from American International Group (AIG) in a deal worth $1.8bn.
The acquisition will be carried out by a newly established Carlyle-managed fund.
Post-acquisition, Carlyle will hold 71.5% stake in Fortitude Re (including the 19.9% stake it took at launch in November last year), while T&D and AIG will own a 25% and 3.5% stake, respectively.
Carlyle said that the acquisition will enable it to support Fortitude Re’s growth plans, and offer the reinsurer access to its various investment strategies.
Additionally, T&D will help Fortitude Re to develop its strategically differentiated capabilities. With the support of Carlyle, T&D and AIG, Fortitude Re will work to acquire and manage legacy insurance portfolios.
Pursuant to the terms of the agreement, AIG will pay Fortitude Re up to a maximum payment of $500m for certain adverse developments in property casualty related reserves which may take place up to the end of 2023.
AIG president and CEO Brian Duperreault said: “Today’s announcement is 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.
“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 organization. We look forward to their future success.”
Carlyle co-CEO Kewsong Lee stated: “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.”
Subject to regulatory and other customary closing conditions, the deal is scheduled to be completed by the middle of next year.