By Leslie Scism
A British entrepreneur plans to spend as much as $2 billion of investors' money in the U.S. over the next several years trying to replicate his success in scooping up life insurers in the U.K.
A new company headed by 50-year-old Clive Cowdery won approval from Nebraska regulators last week for its first acquisition, a $600 million deal for a life-insurance unit sold by Allstate Corp., a company best known for its car and home policies.
Mr. Cowdery is using $500 million drawn from a $2 billion pool of equity committed by about a dozen U.S. pension funds, life-insurance companies and other investors, he said last week. The rest of the deal is being funded by bank debt.
The new company, Resolution Life Holdings, is a run-off specialist, meaning it will manage investments backing the policies, assist existing customers and pay claims but won't sell new policies. It follows the model of two companies that Mr. Cowdery launched, but no longer owns, in the U.K.
Industry consultants and bankers don't think Resolution Life will have difficulty finding things to buy: Many insurers have been putting blocks of business up for sale amid low interest rates that crimp profits and sluggish sales for some types of life insurance.
"What looks like a problem to the seller looks like an opportunity to us," said Mr. Cowdery, chairman of Resolution Life.
Resolution isn't publicly disclosing its investors, but Prudential Financial Inc., PRU +0.34%
whose former chief financial officer, Richard Carbone, is a Resolution Life director, confirmed it is among Resolution's backers.
Blocks of old insurance policies represent "an asset class that throws off predictable cash," which can be attractive to long-term investors, Mr. Carbone said.
In announcing the sale of the Lincoln Benefit Life unit last year, Allstate said it was narrowing the focus of its remaining life-insurance business to products sold through Allstate agencies and employers. The Lincoln unit deployed a different means of distribution, specializing in life-insurance and annuity sales through independent agents and brokerage firms.
Allstate said it settled on Resolution as a buyer because of Mr. Cowdery's track record in the U.K. in managing in-force life-insurance policies.
Mr. Cowdery said he got the idea for a run-off business when working for General Electric Co. GE +0.27%
in the 1990s and early 2000s, in a job that entailed scouting out European and British insurers for possible acquisitions.
"Most of the things I would look at, I would come back and say, 'Look, all the value is in the in-force business, not the new business,'" he said. "The light bulb that went off in my head was that life-insurance companies, if they were no longer exposed to the risk of writing new policies, could provide stable cash flow" to investors.
Resolution aims to deliver 10% to 12% annual returns to its investors, he said. "Think of us as a yield play," he said.
In a recent sign of pension-fund hunger for such investments, Canada Pension Plan Investment Board on March 21 said it was buying Wilton ReHolding Ltd. for $1.8 billion from a group of investors. Wilton Re's operations include buying closed blocks of life-insurance policies.
Mr. Cowdery said Resolution would conservatively invest the money backing policyholders' contracts. "We are insurance nerds," not aggressive investors, he said.
Mr. Cowdery doesn't have a university education and worked as a life-insurance salesman early in his career.
By 2008, his British operations had created a personal fortune of about £160 million ($266.5 million), the latest figure that has been disclosed about his wealth. Last week he declined to provide an update, but said: "Things have gone well since."
Source The Wall Street Journal
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