Carlyle signs new advisory agreement with Fortitude Ray

The firms said Thursday that Carlyle will earn a recurring fee based on all of Fortitude Re’s assets to assist the reinsurer with acquisitions and identify new growth opportunities.

The Wall Street Journal previously reported on the deal with Fortitude.

Carlyle, which manages $301 billion, expects its credit segment’s fee-earning assets to increase by $50 billion and its annual fee-related income by $50 million when the new agreement takes effect on Friday.

Carlyle also raised $2.1 billion for Fortitude from the reinsurer’s existing investors and committed up to $150 million in total from its balance sheet.

In 2018 Carlyle took a 19.9% ​​stake in Fortitude, which was created to reinsure American International Group Inc.’s legacy liabilities. The following year, the firm said it would join with Japanese insurance company T&D Holdings Inc. to take a majority stake in Bermuda. -based reinsurer.

“This new injection of equity should position us to nearly double the size of Fortitude’s balance sheet,” said Brian Schreiber, head of Carlyle Insurance Solutions.

The latest deal is significant for Carlyle. Its credit business ended 2021 with $52 billion in fee-earning assets, and the firm reported $598 million in fee-related income for the full year.

The move is the latest proof of how the largest private-equity firms are looking to the insurance industry as a source of so-called permanent capital, which pays fixed fees and does not need to be replenished continuously.

Following in the footsteps of Apollo Global Management Inc., firms including KKR & Co., Blackstone Inc. and Brookfield Asset Management have captured the need to generate returns for their cash among insurers who are involved in publicly traded corporate and government-owned businesses. Bond may be beyond. , They each have developed their own insurance strategies, as well as an ever-expanding range of products designed specifically for insurance companies.

A significant portion of Fortitude’s assets are also invested in Carlyle’s products.

The new agreement moves Carlyle toward some of the goals set by Chief Executive Kawsong Lee last year: to increase global debt assets to more than $80 billion by 2024 and double the segment’s fee-related income.

In a unique twist on the typical management agreement, the fees that Fortitude will pay to Carlyle will be based on the reinsurer’s overall profitability. Other investors with higher exposure to Fortitude will also make a minority investment in the advisory unit being created by Carlyle.

“We need to have a fee structure that is really tied to Fortitude’s performance,” said Carlyle Head of Global Credit Mark Jenkins. “This creates a virtuous cycle because ultimately we are encouraged to grow in a way that benefits our investors.”

This story has been published without modification to the text from a wire agency feed