American International Group’s newly-created reinsurer designed initially to back old policies it has will expand its focus to the broader industry.

The insurance giant said that it, along with The Carlyle Group, would partner to build DSA Re into a standalone reinsurer that also takes on claims handling and run-off management business for long-dated, complex risks to the global insurance industry.

“AIG launched DSA Re to help us efficiently manage our legacy liabilities, honor our policy obligations and maximize financial flexibility,” AIG President and CEO Brian Duperreault said in prepared remarks. “This partnership with Carlyle meets these objectives while allowing AIG to free up capital and participate in the build-out and growth of the business. We look forward to working closely with Carlyle to position DSA Re for long-term success.”

AIG established DSA Re in February 2018 as a Bermuda-based, composite reinsurer of its Legacy insurance portfolio, consolidating its non-core insurance lines under a specialized team with expertise in run-off, while continuing to ensure it meets its obligations to policyholders. Right now, DSA Re reinsures $36 billion of AIG’s Legacy Life and Annuity and General Insurance liabilities, AIG said. But DSA Re’s diversified risk portfolio, claims operation, and efficient administration capabilities offer the basis for a platform that can be scaled over time, the insurer argues.

The plan, AIG, along with Carlyle (and its experience in separating and standing up companies), involves building DSA Re into a platform that complements DSA Re’s financial strength with its strategically differentiated capabilities.

As part of the transaction, Carlyle will acquire a 19.9% stake in DSA Re and enter into a strategic asset management relationship whereby DSA Re and AIG will, in aggregate, allocate $6 billion of assets into various Carlyle managed strategies across corporate private equity, real assets and private credit.

“We have a terrific partner in AIG, and will work closely together to help DSA Re become independent and positioned for growth over time.” Kewsong Lee, Carlyle’s Co-Chief Executive Officer, said in a prepared statement.

The transaction is expected to close in approximately 60 days, subject to required regulatory approvals and other customary closing conditions.

Goldman Sachs & Co. LLC was the financial advisor and Sidley Austin LLP was the legal advisor to AIG for this minority interest equity sale.

Citi was the financial advisor and Debevoise & Plimpton LLP was the legal advisor to The Carlyle Group.

AIG recently closed its $5.6 billion acquisition of Validus Holdings. The insurer will release Q2 2018 earnings on Aug. 2.

Source: AIG/The Carlyle Group