Investment bank Goldman Sachs has announced the closing of the private offering of shares in its reinsurance group, completing the sale process of a majority stake in the business. The private offering saw shares offered in the Global Atlantic Financial Group, which was formerly known as the Goldman Sachs Reinsurance Group and it includes the reinsurer brand Ariel Re as well.
The private offering of shares in the reinsurance arm of the investment bank has been underway for a number of months. The reason behind the sale is changing regulation which makes it harder, or impossible, for banks the size of Goldman to retain full control of operations which are unrelated.
On a recent earnings call, Harvey M. Schwartz, Global Co-Head of The Securities Division at Goldman Sachs, commented; “As we gain greater clarity on regulatory changes, particularly capital requirements, we will respond accordingly. For example, given the Basel III capital changes that we incur as an owner of our own reinsurance business, we are considering a potential sale of the majority stake in the business.”
After the completion of the share sale process Global Atlantic has $1.75 billion of equity and a global shareholder base of over 1,000 investors, including Goldman Sachs itself. Global Atlantic has more than $15 billion in assets and around 200 employees with offices in New York, Massachusetts, Bermuda and London.
Global Atlantic has two business units; a U.S.-focused life and annuity reinsurance segment, and a global property and casualty reinsurance operation run out of London and Bermuda under the Ariel Re brand. The management team that has built and run the business since its launch continue to be involved and will lead the business under the new Global Atlantic brand.
Allan S. Levine, Chairman and CEO of Global Atlantic said; “We are pleased to have successfully completed the transaction and believe that our new structure and diversified investor base position us well to continue to build our business and serve our clients effectively in a very dynamic market environment. We are pleased that Goldman Sachs will retain a minority stake and, along with our other lead investors, be a key partner in the next phase of our company’s growth.”
The announcement from Goldman Sachs today says that the shares were sold to institutions and high net worth clients of Goldman Sachs. These individuals and entities now hold a majority stake in Global Atlantic, leaving Goldman Sachs with a minority stake in the reinsurance operations. Global Atlantic Financial Group is a recently formed entity which the reinsurance business will now operate as. It is interesting that high net worth clients have also bought into the company as it shows another way that investors are gaining access to the returns of reinsurance premiums.
The Financial Times recently reported that Goldman Sachs had sold 75% of its reinsurance operations. The announcement today, signifying the closing of the sale, does not confirm what percentage has actually been sold.