American International Group Inc.'s pending sale of a majority of its holdings in Fortitude Reinsurance Company Ltd. signals an end to the company's legacy life and annuity segment.
In a deal announced Nov. 25, Carlyle Group LP and T&D Holdings Inc. agreed to buy most of AIG's stake in Fortitude Re for $1.8 billion. The transaction would leave AIG with 3.5% ownership in the reinsurer, resulting in its legacy segment dwindling to a "de minimis amount," according to President and CEO Brian Duperreault.
"The real question is we'll wonder if we even need a legacy segment at that point," Duperreault said Dec. 10 at Goldman Sachs' U.S. Financial Services Conference. "We'll make that decision shortly, but, more than likely, we'll probably just discontinue the legacy segment."
Duperreault said AIG is "not in the legacy business," but Carlyle wants to get into that business, so the deal is "a perfect marriage."
"We can still maintain a small percentage as an investment, but [Carlyle and T&D] can take this company and take it forward as a legacy player," he said. "We then free up the capital to go to the business that we like."
When asked how that capital will be used, Duperreault said there is always talk about paying down the company's debt, but he also added that his preference would be to "reinvest in the business."
AIG created DSA Re in early 2018 as a reinsurer for its legacy portfolio. Carlyle purchased 19.9% of DSA Re, renamed Fortitude Re, from AIG later that year. Duperreault at the time said the strategic partnership with Carlyle was in keeping with AIG's original intent in forming DSA Re, which was to manage legacy liabilities while honoring policy obligations and maximizing the company's financial flexibility.