AIG is not American Express. The Carlyle Group closed on its deal with AIG for Fortitude Group Holdings, a re-insurer of several AIG legacy lines. Carlyle walked away from its deal for American Express global travel unit mid coronavirus pandemic.
Carlyle will own 71.5% of Fortitude Re, the reinsurer of $30 billion of reserves from AIG’s Legacy Life and Retirement Run-Off Lines and $4 billion of reserves from AIG’s Legacy General Insurance Run-Off Lines related to business written by multiple wholly-owned AIG subsidiaries.
SEC filings on the deal state:
AIG sold a 19.9 percent ownership interest in Fortitude Holdings to TC Group Cayman Investments Holdings, L.P. (“TCG”), an affiliate of Carlyle, in November 2018 (the “2018 Fortitude Sale”).
As a result of completion of the Majority Interest Fortitude Sale, Carlyle FRL purchased from AIG a 51.6 percent ownership interest in Fortitude Holdings and T&D purchased from AIG a 25 percent ownership interest in Fortitude Holdings; AIG retained a 3.5 percent ownership interest in Fortitude Holdings and one seat on its Board of Managers.
The approximately $2.2 billion of proceeds received by AIG at closing include (i) the approximately $1.8 billion under the Majority Interest Fortitude Sale, which is subject to a post-closing purchase price adjustment pursuant to which AIG will pay Fortitude Re for certain adverse development in property casualty related reserves, based on an agreed methodology, that may occur on or prior to December 31, 2023, up to a maximum payment of $500 million; and (ii) a $383 million purchase price adjustment from Carlyle FRL and T&D, corresponding to their respective portions of a proposed $500 million non-pro rata distribution from Fortitude Holdings that was not received by AIG prior to the closing.
In connection with the Majority Interest Fortitude Sale, AIG, Fortitude Holdings, and TCG have agreed that, effective as of the closing, (i) AIG’s investment commitment targets under the 2018 Fortitude Sale (whereby AIG had agreed to invest certain amounts into various Carlyle strategies and to make certain minimum investment management fee payments by November 2021) have been assumed by Fortitude Holdings and AIG has been released therefrom,
Fortidue Re is obligated to invest $6 billion in Carlyle funds, which places it at risk for capital calls, in addition to management fees and dividend bleeding.
Carlyle's cash mining sank nursing home giant ManorCare and refinery Philadelphia Energy Solutions, which went up in a giant fireball. What harm can Carlyle do should it default on Fortitude Re?
Update 7-8-20: KKR will buy life insurer Global Atlantic for book value, $4.4 billion. "The buyout group is using its own balance sheet to fund the deal, which
will boost KKR's assets under management by a third, to $279bn." How much did liabilities under management increase with the deal?
Update 11-20-20: Carlyle informed investors of their ability to put Fortitude Re funds into Carlyle products.
Update 8-31-21: The greed and leverage boys continue their widespread investment in insurance companies.
Update 9-27-21: ZeroHedge and WSJ noticed the pattern of PEU's buying life insurance portfolios.
Update 6-29-23: Investor Kirk Simon called out the PEU boys buying insurance companies and steering insurance reserves into their PEU offerings.
The whole private equity thing of buying up life insurance companies then investing the premiums just seems a bit sketchy.I'll shorten it to the whole private equity thing seems a bit sketchy.
