AIG sale of Ascot stake to Canada Pension Plan confirmed

As expected, primary insurance giant AIG has sold its interest in Ascot Underwriting Holdings Ltd. and its syndicate-financing subsidiary Ascot Corporate Name Ltd. to Canada Pension Plan Investment Board (CPPIB).

AIG was reported to be in talks to sell its Ascot stake a few weeks ago, providing further evidence of the appetite of the Canada Pension Plan Investment Board (CPPIB) to invest in insurance and reinsurance linked assets.

The stake in Ascot has been sold for $1.1 billion, inclusive of CPPIB’s requirement to recapitalise Ascot Syndicate 1414’s Funds at Lloyd’s. AIG will receive around $240 million of cash proceeds from the sale, after the top-up of the fund’s at Lloyd’s and release of an AIG-guaranteed Letter of Credit currently supporting the syndicate.

“This deal successfully repositions our strategic focus and underwriting capacity to our relationship with Ascot in Bermuda, while monetizing our position in the syndicate at an attractive value and retaining exposure to the syndicate as a reinsurer,” commented Robert Schimek, Chief Executive Officer, Commercial Insurance at AIG. “We are also pleased to start a collaborative relationship with CPPIB who we see as an ideal partner for Ascot’s outstanding management team.”

Andrew Brooks, Chief Executive Officer of Ascot Underwriting Ltd. added; “Ascot and AIG have enjoyed a strong and profitable relationship for over 15 years and we value the support that we have received from AIG throughout that time. We are pleased to be continuing our relationship through Ascot Underwriting Bermuda and look forward to building on the success of that platform.”

AIG is keeping a reinsurance relationship with Ascot unit Ascot Underwriting Bermuda Ltd., a wholly-owned subsidiary and part of the sale to CPPIB. The Bermuda branch will continue to act as the managing general agent for AIG-Ascot Re, which underwrites assumed treaty reinsurance business on behalf of AIG subsidiary American International Reinsurance Company Ltd.

Ascot, which focuses on property insurance, marine insurance, and reinsurance, underwriting at Lloyd’s and beyond, will provide CPPIB with another route to extracting value from insurance-linked returns.

CPPIB said it, “expects to pursue mutually beneficial business opportunities with AIG through Ascot moving forward as we seek to build on the collaborative relationship developed through this transaction.”

“This acquisition represents another important step in our strategy to achieve scale in targeted sub-sectors within financial services through long-term platform investments. We have studied the global property and casualty insurance sector for several years and specifically identified Ascot as an ideal platform through which CPPIB can access diverse global insurance premiums at scale,” Ryan Selwood, Managing Director, Head of Direct Private Equity, CPPIB, said. “Ascot’s proven track record of superior underwriting performance through pricing cycles, standing in the Lloyd’s specialist insurance market and highly experienced management team, provides CPPIB with turn-key access to an asset class that is well-suited to our long-term horizon.”

“Ascot is thrilled to be entering into a strategic partnership with CPPIB that will have at its core a common philosophy, understanding and long-term vision, and which will enable Ascot to position the business in a way that will significantly enhance the services that it can offer to both its clients and brokers,” Ascot CEO Brooks explained. “CPPIB ownership and their depth of capital resources will allow Ascot to move to the next stage in its development and to deliver a business plan for profitable growth over the long term with strongly aligned goals and objectives. Ascot is excited about the future opportunities that CPPIB’s ownership and capital strength will bring.”

It’s further evidence that reinsurance and insurance are an attractive asset class for pension funds, not just via insurance-linked securities (ILS) in directly backing risk but also through equity stakes such as this, despite the softening of the market and the competitive pressures being seen.