(Adds background on CPPIB)
TORONTO, March 21 The Canada Pension Plan
Investment Board (CPPIB) will buy life insurance and reinsurance
provider Wilton Re Holdings Ltd for $1.8 billion from a group of
private equity firms, the first foray by the global dealmaker
into the U.S. insurance business.
CPPIB said on Friday it will acquire Wilton Re, a leading
purchaser of closed blocks of life insurance policies, from a
group of private equity firms led by Stone Point Capital, Kelso
& Co, Vestar Capital Partners and FFL. Closed blocks are
insurance policies still in force but no longer being sold.
The acquisition, which is CPPIB's largest direct private
equity deal, highlights a big push by Canadian pension funds and
other major private equity investors to invest in companies
directly to cut out buyout funds as middlemen and save money on
CPPIB plans to use the asset as a platform for further U.S.
expansion into closed-block life insurance, which is attractive
for its predictable returns, CPPIB Senior Vice President of
Private Investments André Bourbonnais said in an interview.
"It generates high cash yield. It also is not correlated to
the capital markets, which is important in terms of
diversification for the fund. And it has relatively low
volatility compared to the market. So we like it as an asset
class," he said.
"We intend to provide more capital to the platform."
Wilton Re, based in Hamilton, Bermuda, has invested more
than $1.7 billion in strategic in-force reinsurance and mergers
and acquisitions since its inception in 2005.
Toronto-based CPPIB, which manages investments for Canada's
national pension fund, has net assets of C$201.5 billion ($180
billion), making it one of the biggest pension funds in the
CPPIB began diversifying beyond traditional financial assets
such as stocks and bonds in earnest in 2006, and was sideswiped
by the financial crisis in 2009.
But big global deals for real estate, infrastructure and
other assets have boosted the fund's rate of return, and it has
opened offices in London, New York, and Hong Kong. In April, it
will open one in Sao Paulo, Brazil.
The fund's asset mix was 50.2 percent equities, 33.3 percent
fixed income and 16.5 percent real assets at the end of 2013,
with 10.9 percent in real estate and 5.6 percent in
Bourbonnais said asset prices have risen as the global
economy has recovered.
"Clearly, I think that the market is high, both in terms of
private equity and in terms of infrastructure. So (we must) find
the very interesting companies where we think that there's
transactions to be made that are usually more complex (and)
attract less bidders in an auction," he said.
Debevoise & Plimpton LLP acted as CPPIB's legal adviser on
(Reporting by Allison Martell and Andrea Hopkins, additional
reporting by Cameron French and Greg Roumeliotis; Editing by
Jeffrey Benkoe, Steve Orlofsky and Peter Galloway)