Carlyle Group has raised $2.1 billion from existing investors to help expand its insurance business, Fortitude Re, and entered into a new advisory agreement that could add up to $50 billion in fee-earning assets under management, Christa Zipf, Carlyle spokeswoman, said in an emailed response to questions.
The existing investors would include as co-investors Japanese insurance company T&D Holdings and Carlyle, which expects to contribute up to $150 million from its balance sheet to this capital raise. In 2019, Carlyle and T&D Holdings purchased a 76.6% interest in reinsurer Fortitude from American International Group for about $1.8 billion.
Carlyle originally acquired its 19.9% stake Fortitude in November 2018 with balance sheet assets.
The current deal reduces Carlyle's stake to about 10.5%, due in part to an ownership adjustment contemplated as part of the capital raise, a news release said.
At the same time, Carlyle and Fortitude Re have entered into a new strategic advisory agreement in which Fortitude will pay a new Carlyle insurance consulting business, Carlyle Insurance Solutions Management, a recurring fee based on Fortitude Re's general account assets in exchange for money management as well as M&A, transaction origination and execution services.
The fee will adjust based on Fortitude Re's overall profitability. Investors in the capital raise will also make a minority investment in Carlyle Insurance Solutions and share in the advisory fees.
Carlyle expects that the new money management and advisory arrangement will result in its global credit business' fee-earning AUM to increase by $50 billion and its incremental annualized fee related earnings to grow by $50 million as of April 1, each effective April 1. If Fortitude Re grows as anticipated, Carlyle expects to double its fee-related earnings from the advisory relationship by 2025, the news release said.
