Clive Cowdery eyes $100bn of insurers’ trapped capital

Life insurers are sitting on more than $100bn of trapped capital that they could release through disposals in the next decade, says sector entrepreneur Clive Cowdery.

Mr Cowdery, who has built a career buying old books of life insurance business that other companies no longer want, said he expected insurers to speed up the pace of dealmaking as they seek to free up capital.

“Look at the time pressures that the owners of these blocks of insurance policies are under to generate better [returns], and you realise they can’t just sit here for 20 years,” he told the Financial Times.

Many life insurance contracts can last for decades and while they are in force insurers are not able to use the capital that backs them. But changing corporate priorities often mean that the insurers which sold these policies want to redeploy their capital elsewhere, and so look for buyers for their legacy books.

Private equity groups have been among the buyers. Last year Viridium, which is backed by Cinven, completed the acquisition of Germany-based Generali Leben, which had €40bn of assets under management.

Mr Cowdery added that IT investment was another major driver of deals: “These systems need completely investing in. It’s a horrible problem [for the insurers] . . . I can write that cheque because I’m here forever. They’re trying to get out.”

The entrepreneur made his name with a string of deals in the UK, but he said that acquisitions for his latest consolidation vehicle — which like the other two is called Resolution — would be elsewhere.

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“Half that capital . . . is probably in America, and obviously in countries like Australia which have only just begun the consolidation process. Western Europe is just beginning,” he said, adding that Japan was also a source of potential deals: “It’s got so much dead capital sitting in people’s books . . . it will one day become sensible for that to be put into run-off.”

Willem Loots, a senior director at Fitch Ratings, said Mr Cowdery had plenty of experience. “Consolidation requires a high degree of specialisation, such as skills in capital management and administration processes. To be successful you need substantial experience and Clive is a very experienced operator.”

Mr Cowdery has raised $3bn for his latest Resolution vehicle, from investors including JPMorgan Chase, KKR, Temasek, Nippon Life Insurance, and the Universities Superannuation Scheme.

Much of that has been spent on three transactions — one in Australia and two in the US, including December’s $1.25bn purchase of life insurance policies from Voya.

Mr Cowdery said the investors would be willing to put in more money to back more deals: “They’re all expecting to follow their capital through to the point . . . when we do the listing.”

He could list the business on the stock market once it reaches a valuation of $7bn to $8bn — similar to the size of the other two Resolution vehicles when they were sold.

The latest vehicle is likely to be floated to raise more funds for dealmaking. “After we’ve got critical mass, sufficient scale that we can raise capital at lower prices and therefore fulfil our mission, which is to help even more insurance companies deal with their stranded blocks and their trapped capital,” Mr Cowdery said.

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But deals have not always gone smoothly as regulators have taken their time to grant approval. RL360’s £340m acquisition of Friends Provident International, announced in July 2017, has still not completed, nor has Cinven’s €925m acquisition of Axa Life Europe, which was announced in August 2018.

And last year the UK courts blocked a deal under which Rothesay Life would have bought a £12bn book of annuities from Prudential. Rothesay Life is backed by Blackstone, the Singaporean sovereign wealth fund and US-based MassMutual. The two companies are appealing against the ruling.



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