Nassau Re buys Universal American to launch reinsurance platform

Nassau Reinsurance, the start-up backed by San Francisco based private equity investor Golden Gate Capital, has again demonstrated its desire to acquire insurance assets linked to long-term capital with the acquisition of Universal American.

Nassau Reinsurance Group Holdings L.P., was founded by experienced insurance industry executives Phillip J. Gass, previously Chairman of Fidelity & Guaranty Life and Managing Director of financial services investment firm HRG Group Inc. (Harbinger), and Kostas Cheliotis previously Director and Chairman of the Compensation Committee of FGL and Senior Vice President & Deputy General Counsel of HRG.

The firm launched with a three-pronged strategy focused on insurance, reinsurance and asset management, targeting the underwriting of long tail insurance and reinsurance liabilities, concentrating on the life, annuity and long-term care sectors.

It announced today a definitive agreement to acquire Universal American Corp.’s traditional Insurance business, which includes subsidiaries Constitution Life Insurance Company and The Pyramid Life Insurance Company, as well as a portion of business written by American Progressive Life & Health Insurance Company of New York.

The acquisition sees Nassau acquire all outstanding shares of the Constitution Life and Pyramid businesses for cash, and the remaining portion of the Traditional Insurance business at American Progressive, for approximately $43 million, subject to purchase price adjustments based on capital and surplus of $68.5 million. Additionally, upon closing, Nassau will fund $20 million in equity capital to support the transaction and strengthen the business moving forward, a sign that it intends to grow.

“Nassau is excited to acquire UAM’s Traditional Insurance business, providing UAM with a complete solution to exit these business lines,” commented Phillip J. Gass, Nassau’s Chairman and CEO.

“With stable profitability and predictable cash flow, we believe the Traditional Insurance business is an attractive asset for Nassau that will establish our onshore reinsurance platform, which we intend to grow through additional closed block reinsurance transactions. Further, with the injection of $20 million in new capital, we are bolstering the business’ financial strength to support its policyholders and allow for future growth opportunities,” Gass explained.

Richard A. Barasch, Chairman and CEO of Universal American, added; “Continuing our focus on exiting non-core businesses, we are confident that we have found the right buyer for our Traditional Insurance business. Nassau provides a unique combination of substantial financial resources, a proven track record of successfully managing insurance and reinsurance businesses and a long-term commitment to the Traditional Insurance business.”

The acquisition involves business focused on Medicare Supplement, Long Term Care, Disability, Life, and other ancillary insurance products, all of which have been in run-off since 2012. Hence the acquisition of these businesses will provide long-term assets that Nassau and its backers can manage.

Once again this transaction gives Nassau Reinsurance access to long-term capital, something which was deemed an attractive reason that private equity funders at Golden Gate Capital backed the reinsurance firm at start-up.

Once again this transaction demonstrates that despite worries about re/insurance market conditions, there are plenty of investors looking at the space with ideas for how to invest and grow in the sector profitably.

Run-off transactions like this are attractive to investors, supplying them with long-term assets they can hope to profit on and manage more effectively than the incumbent firm’s could.

They also reflects the attraction that investors, such as private equity and hedge funds, have for gaining access to business which provide longer-term capital access, which in the case of this deal is again the case for Nassau.

This is the second deal from Nassau Reinsurance in just over a week, as it aggressively looks to build a portfolio of assets from insurance businesses, evidenced by the injection of capital and intent to acquire more closed-blocks. As this type of strategy becomes increasingly prevalent, bringing more institutional capital into re/insurance, the pressure on the sector could broaden.

Also read:

– Private equity backed Nassau Reinsurance buying Phoenix Co’s.

– Private equity follows hedge funds into reinsurance for long-term capital.