Nassau Reinsurance Group Holdings L.P., the start-up backed by San Francisco based private equity investor Golden Gate Capital, is to acquire Hartford, Connecticut based life and annuity specialist Phoenix Companies.
Nassau Reinsurance, 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 has entered into a definitive agreement to acquire Phoenix for $37.50 per share in cash, giving the deal an aggregate equity purchase price of $217.2 million. That’s a 188% premium over Phoenix’s closing stock price of $13.03 on 28th September.
Nassau 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.
These sectors give Nassau 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.
Nassau sees Phoenix as a platform to grow into life and annuities, and intends to inject a further $100 million of new equity capital into Phoenix to further stabilise and improve the balance sheet as well as providing growth capital for the future. The deal will take Phoenix private.
“After considering various strategic alternatives, Phoenix’s Board of Directors initiated a thorough process and, in conjunction with our financial and legal advisors, determined a transaction with Nassau was in the best interests of Phoenix and our shareholders,” commented James D. Wehr, Phoenix’s president and chief executive officer.
“The transaction provides a significant premium to Phoenix shareholders, and the additional capital provided by Nassau will make Phoenix and its subsidiaries financially stronger and well-positioned for the long term, to the benefit of policyholders and other key constituents. We look forward to working closely with Nassau to close this transaction. Nassau’s founders bring substantial resources and proven experience managing insurance companies and are committed to maintaining our 164-year legacy of meeting customers’ financial needs,” he continued.
Phillip J. Gass, Nassau’s chairman and CEO, said; “This transaction marks Nassau’s first life insurance acquisition, which will become our U.S. life and annuity platform for future growth. Taking Phoenix private, in conjunction with the additional $100 million in new equity capital, will accelerate the company’s turnaround, bolster its financial strength and ratings, and benefit policyholders and distribution partners. We are also very excited to support the continued growth of Saybrus, which Phoenix has done a great job building into a uniquely competitive life and annuity distribution business.”
Saybrus Partners, Inc. is a Phoenix subsidiary and gives Nassau Reinsurance a ready-made distribution engine for growth.
Golden Gate Capital, the backers of Nassau with over $15 billion of committed capital is a great example of private equity players getting into areas of insurance and reinsurance where they can leverage efficiencies, across underwriting and asset management, while benefiting from access to long-term capital.
Despite the worries about re/insurance market conditions there are plenty of investors looking at the space with ideas for how to invest and grow re/insurance businesses profitably, something which suggests the flattening of the cycle may continue to spread.
It 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 certainly the case through the life and annuities strategy.