Canada Pension Enters Insurance Business With Wilton Re

Canada Pension Plan Investment Board, the nation’s largest pension fund manager, agreed to buy Wilton Re Holdings Ltd. for $1.8 billion to expand into the life insurance business.

The reinsurer is being acquired from investors including Stone Point Capital, Kelso & Co. and Vestar Capital Partners Inc., the Toronto-based fund manager said today in a statement. The purchase is Canada Pension’s first direct investment in the insurance sector.

Wilton Re is “an ideal platform through which CPPIB can deploy significant follow-on capital at scale in the U.S. life insurance sector,” Andre Bourbonnais, senior vice president of private investments at the pension fund, said in the statement.

Reinsurance is attractive for pension funds as they seek long-term cash to match their liabilities. Reinsurers such as Bermuda-based Wilton Re have found opportunities in recent years by taking on business from primary carriers that are seeking to simplify operations or limit risks.

Wilton Re struck deals this year to assume liabilities from CNO Financial Group Inc. and CNA Financial Corp., the insurer controlled by Loews Corp. Wilton Re, run by ex-Swiss Re Ltd. executive Chris Stroup, won backing in 2004 from investors including insurance broker Marsh & McLennan Cos., and Vestar. Since its creation in 2005, Wilton Re has invested at least $1.7 billion in acquisitions and risk-transfer deals, according to the statement.

Closed Blocks

Canada Pension favors investments in closed blocks of coverage, in which insurers collect revenue and pay claims on policies issued in prior years, without seeking new clients. Such business accounts for about 40 percent of premiums written in the U.S. and U.K., according to a July 2012 report by research and consulting firm Celent.

Stone Point, which counts former Goldman Sachs Group Inc. director Stephen Friedman as chairman, has backed insurers before, including Enstar Group Ltd. (ESGR) and Harbor Point Ltd. Kelso also invests in the industry and worked with billionaire hedge-fund manager Dan Loeb to establish Third Point Reinsurance Ltd., which had an initial public offering last year.

Reinsurance Group of America Inc., which also backs life policies, gained 2.5 percent to $81.02 at 10:51 a.m. in New York, the most since Jan. 31 and the highest since the company was listed in 1993. Enstar Group rose 1.5 percent to $140.39.

This is Canada Pension’s largest public acquisition since it led a consortium to purchase Neiman Marcus Group Ltd. last year. Canada Pension manages C$201.5 billion ($179 billion) for 18 million Canadians excluding the province of Quebec.

To contact the reporters on this story: Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net; Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net Dan Kraut, Steven Crabill

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