Carlyle signs advisory deal with Fortitude Re

Global investment firm The Carlyle Group and FGH Parent, LP, the parent company of Bermuda’s largest multiline reinsurer (together with its subsidiaries, “Fortitude Re”), announced significant milestones that advance Carlyle’s Insurance Solutions strategy and position Carlyle and Fortitude Re for insurance industry leadership.

Carlyle has raised $2.1 billion in equity capital for Fortitude Re from existing investors, including strategic co-investor T&D Insurance Group, underscoring their support for the strategy and Fortitude Re’s prospects. Carlyle expects to contribute up to $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.

In addition, Carlyle has 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 $50 billion and incremental annualized Fee-Related Earnings (“FRE”) by $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.

“Our approach is all about creating alignment and building a structure that benefits Carlyle, Fortitude Re, our investors and Fortitude Re’s policyholders. These transactions position us to accelerate Fortitude Re’s growth while meaningfully increasing Global Credit AUM and FRE to deliver shareholder value.” – Brian Schreiber, Head of Carlyle Insurance Solutions.

“These milestones significantly accelerate our Insurance Solutions strategy and enhance our capabilities to pursue the multi-trillion dollar global market opportunity for legacy liabilities. We made great strides in 2021 with several transactions across all of Fortitude Re’s lines of business and are honored to have the support of a world-class group of counterparties and investors.” – Brian Schreiber, Head of Carlyle Insurance Solutions.

“We are very pleased to expand our successful partnership with Carlyle, strengthening Fortitude Re’s capabilities to serve our insurance clients and their policyholders. We expect this strategic agreement with Carlyle, including the significant capital raise, will support our continued growth as a leading global reinsurer of legacy insurance portfolios.” – James Bracken, CEO of Fortitude Re.

Fortitude Re will have substantial financial flexibility arising from adjusted equity capital of more than $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 $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.