Prudential and Warburg Pincus launch $1 billion Bermuda reinsurer Prismic Life

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Prudential and Warburg Pincus launch $1 billion Bermuda reinsurer Prismic Life

Prudential Financial Inc (NYSE: PRU ). and Warburg Pincus, alongside a group of investors, have jointly contributed $1 billion of equity to establish Bermuda-based reinsurer, Prismic Life Reinsurance Ltd., as announced on Thursday. The newly formed company will be led by Amy Kessler, the founding leader of Prudential’s international reinsurance business.

In its inaugural transaction, Prismic will assume $10 billion of structured settlement annuity contracts from Prudential, subject to regulatory approvals. This move allows Prudential to free up capital to write new insurance business. Initially, Prudential and Warburg Pincus will own 20% and 15% of Prismic respectively, with global investors including Nomura Holdings (NYSE: NMR ) Inc. owning the remaining equity.

Prudential's Vice Chair, Rob Falzon, stated that the creation of Prismic allows the firm to divest assets with longer durations that are less valued by public markets. These include variable annuities and guaranteed universal life insurance policies.

Falzon also highlighted that Prudential sees opportunities to manage assets for other insurers and grow its business of providing flow reinsurance, including pension-risk transfer deals, and third-party insurance. He noted that the pension-risk transfer market in the U.S. expanded to about $50 billion of deals last year as firms sought to offload their defined-benefit pension obligations.

Dan Zilberman, head of capital solutions and co-head of financial services at Warburg Pincus, expressed confidence in the potential growth of this new venture. Warburg Pincus has a history of investing in the insurance industry through its private equity funds, including Bermuda reinsurers RenaissanceRe Holdings Ltd (NYSE: RNR ). and Arch Capital Group (NASDAQ: ACGL ) Ltd.

Prudential's investment arm will manage traditional assets such as fixed income for Prismic, while Warburg will oversee the reinsurer’s investments in private equity and other illiquid assets. The transaction was advised by Deutsche Bank AG (NYSE: DB ).

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