Carlyle strikes advisory deal with Fortitude Re

In a move that will significantly increase the fee-related earnings and AUM of its global credit platform, Carlyle has struck a strategic advisory deal with reinsurer Fortitude Re.

As part of an advisory deal with Fortitude Re, Carlyle, which already holds a majority stake in the Bermuda-based firm with Japanese insurance company T&D Holdings, raised $2.1 billion in equity capital from existing investors, and expects to contribute as much as $150 million of that total.

In return for providing advisory services including M&A, transaction origination and execution, and capital management, Carlyle will earn a recurring fee based on all of Fortitude Re’s general account assets. The fee will be based on the reinsurer’s overall profitability, and will adjust within a previously agreed-upon range, the firms said.

The deal will increase Carlyle’s credit platform’s fee-earning AUM by $50 billion, nearly double the $52 billion the credit group reported in 2021. It will also add $50 million of annualised fee-related earnings to the $111.6 million posted by the credit business last year. Carlyle said that if Fortitude Re grows as anticipated, the manager expects to more than double the fee-related earnings generated by the advisory relationship by 2025.

“Legacy insurance liabilities are a multi-trillion-dollar market opportunity. Fortitude now has the capital to unlock that opportunity in a meaningful way,” Brian Schrieber, head of Carlyle insurance solutions, told Private Debt Investor. “The alignment underlying our structure has created a virtuous circle for all of our stakeholders.”

Fortitude Re will have “substantial financial flexibility” from the adjusted equity capital of more than $6 billion, including the latest capital raise, the firms said. Including a previously announced purchase of Prudential Annuities Life Assurance, Fortitude Re will manage a general account of about $55 billion across life, annuity and property casual insurance products.

Carlyle had $301 billion of AUM as of 31 December 2021.