Carlyle Raises $2.1 Billion for Fortitude Re and Enters Into New Advisory Agreement
Posted on 03/31/2022
Global investment firm Carlyle Group Inc. raised US$ 2.1 billion in equity capital for Fortitude Re from existing investors, including strategic co-investor Taiyo Life Insurance Company (a unit of T&D Insurance Group). Carlyle expects to contribute up to US$ 150 million from its balance sheet to this capital raise. The new capital will strengthen Fortitude Re’s position to pursue further growth and provide innovative solutions to the global insurance industry.
FGH Parent, L.P. is the parent company of Bermuda’s largest multiline reinsurer Fortitude Reinsurance Company Ltd. (Fortitude Re).
Carlyle entered into a new strategic advisory services agreement with Fortitude Re through a newly formed insurance advisor, Carlyle Insurance Solutions Management L.L.C. Under the agreement, Carlyle will provide Fortitude Re with M&A, transaction origination and execution, and capital management services, as well as source new growth opportunities. Fortitude Re will pay Carlyle’s new advisor a recurring fee based on all of Fortitude Re’s general account assets. This fee will adjust within an agreed range based on Fortitude Re’s overall profitability. Investors participating in the capital raise will also make a minority investment in the newly formed advisor and share in the fees under the strategic advisory services agreement, creating further alignment among Carlyle and its investors.
It is expected that the new strategic advisory services agreement with Fortitude Re will increase Global Credit’s Fee-earning AUM by US$ 50 billion and incremental annualized Fee Related Earnings (FRE) by US$ 50 million, each effective April 1, 2022. Carlyle’s Fee-earning AUM and FRE are expected to grow as Fortitude Re delivers on its growth strategy. If Fortitude Re grows as anticipated, Carlyle expects to more than double the FRE generated by this advisory relationship by 2025.
Fortitude Re will have substantial financial flexibility arising from adjusted equity capital of more than US$ 6 billion inclusive of this capital raise. Including the previously announced acquisition of Prudential Annuities Life Assurance Corporation, Fortitude Re will manage a general account of approximately US$ 55 billion across life, annuity and property casualty insurance products. Led by a team of seasoned insurance executives with deep expertise and decades of experience in underwriting, policy administration, claims management and risk management, Fortitude Re provides bespoke transactional solutions for leading insurers around the world.
Advisors
Debevoise & Plimpton LLP acted as legal counsel to Carlyle. Sidley Austin LLP and Mori Hamada & Matsumoto served as legal counsel to Fortitude Re.
Fortitude Re was formed in 2018 by American International Group, Inc. (AIG) and Carlyle Group to build up AIG’s Bermudian legacy reinsurance platform into a standalone provider. In 2019, AIG agreed to sell a 76.6% interest in Fortitude Re to Carlyle and T&D Holdings, leaving AIG with a 3.5% share.
