(Bloomberg) — Prudential Financial Inc. and Warburg Pincus are among investors that contributed a combined $1 billion of equity to create a Bermuda-based reinsurer, Prismic Life Reinsurance Ltd.
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In its first deal, Prismic is taking on $10 billion of structured settlement annuity contracts from Prudential, freeing up capital for it to write new insurance business. The transaction is subject to regulatory approvals.
Initially, Prudential will own 20% of the new firm, with Warburg controlling a 15% stake, according to an emailed statement. Nomura Holdings Inc. said it’s among global investors owning the remaining equity.
Prismic’s founding allows Prudential to unload assets with longer durations that are less valued by public markets, such as variable annuities and guaranteed universal life insurance policies, Prudential Vice Chair Rob Falzon said in an interview.
Prudential sees opportunities to manage assets for other insurers and to grow its business of providing flow reinsurance, including pension-risk transfer deals, and third-party insurance, Falzon said. The pension-risk transfer market in the US grew to about $50 billion of deals last year as firms sought to offload their defined-benefit pension obligations.
“I’m not sure anyone has the kind of scale and brand that we bring,” said Falzon, whose employer had about $1.4 trillion of assets under management as of midyear.
Prismic’s CEO
Amy Kessler, the founding leader of Prudential’s international reinsurance business, will be Prismic’s chief executive officer, according to the statement.
Prudential’s investment arm, PGIM, will manage traditional assets such as fixed income for Prismic, as well as private credit and real estate, while Warburg will oversee the reinsurer’s investments in private equity and other illiquid assets.
Warburg has been a longtime investor in the insurance industry through its private equity funds, including Bermuda reinsurers RenaissanceRe Holdings Ltd. and Arch Capital Group Ltd.
“Warburg Pincus and Prudential believe that this business has meaningful upside and aspire to grow this business materially,” Dan Zilberman, head of capital solutions and co-head of financial services at Warburg, said in an interview.
Deutsche Bank AG advised Prudential on the transaction.
(Updates with more details on PGIM’s role in eighth paragraph.)
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