Asset manager joins forces with Kuvare
Alternative asset manager Blue Owl Capital is to acquire the asset management arm of life re/insurer Kuvare and has also agreed to manage up to $3 billion of Kuvare's assets.
The agreement will see Blue Owl buy Kuvare Insurance Services (doing business as Kuvare Asset Management) for $750 million while also purchasing $250 million in preferred equity in Kuvare. The $750 million purchase will be paid for with $325 million cash and $425 million in Blue Owl Class A stock and is expected to close in the second or third quarter of 2024.
Kuvare owns Bermuda-based life re/insurer Kuvare Life Re, which also operates a $400 million sidecar company, Kindley Re.
"This investment creates long-term alignment between Blue Owl and Kuvare and provides valuable growth capital to Kuvare's insurance companies, each of which will become new asset management clients of Blue Owl," the companies said. "Founded in 2015, Kuvare is a technology-enabled financial services firm operating several insurance and reinsurance businesses and has become a top 20 fixed and indexed annuity writer in the United States. Kuvare's business segments include retail, institutional reinsurance and specialty insurance advisory services.
"In addition to the preferred equity investment, Blue Owl and Kuvare entered into investment management agreements that will allow Blue Owl to deploy up to $3 billion of assets across its existing Credit, GP Strategic Capital and Real Estate investment platforms, which can grow over time. Upon the closing of the KAM acquisition, Blue Owl will be allocated up to $20 billion of AUM, in aggregate. Kuvare will continue to manage the overall asset allocations for its insurance businesses and strategic investments. Blue Owl's IMAs with Kuvare insurance companies will be additive to Blue Owl's permanent capital base while enhancing Kuvare's investment capabilities."
Doug Ostrover, co-CEO of Blue Owl said: "The creation of Blue Owl Insurance Solutions represents a significant moment in Blue Owl's journey. Our acquisition of KAM allows us to provide broader solutions to the multi-trillion-dollar insurance market at scale. KAM's capabilities in investment grade credit and real estate strategies supplement Blue Owl's existing strength in these asset classes and further accelerate our ability to bring differentiated products and strategies to the market for Kuvare and third-party insurance clients."
Marc Lipschultz, Co-CEO of Blue Owl said: "Our preferred equity investment in Kuvare reflects our confidence in the growth trajectory of the business; both through its extensive distribution network and proven reinsurance strategy.
"This partnership with Kuvare anchors Blue Owl's expanding presence in the insurance channel, greatly complementing our robust institutional and wealth footprint and further diversifying the markets for which we provide investment solutions. In aggregate, we believe these transactions reflect a creative approach to expanding our offerings for the insurance market at an attractive price."
Dhiren Jhaveri, founder, chairman and CEO of Kuvare added: "It is an important and exciting step in the evolution of Kuvare to associate in such an impactful way with an asset manager of Blue Owl's caliber. We always strive to be excellent stewards of assets entrusted to us by our policyholders and reinsurance partners, and the team at Blue Owl has demonstrated a unique commitment to helping us achieve our goals. We especially look forward to continued collaboration with our many valued KAM colleagues who will join the Blue Owl team at the close of this transaction."
In response to the news, rating agency KBRA placed on "Watch Developing" the BBB issuer rating of Kuvare UK Holdings Limited and Kuvare US Holdings, Inc. (KUS) as well as the BBB- long term credit rating of KUS’ $225 preferred shares due 2051. In addition, KBRA placds on Watch Developing the A insurance financial strength rating (IFSR) of Guaranty Income Life Insurance Company and United Life Insurance Company and the A- IFSR of Kuvare Life Re Ltd. and Lincoln Benefit Life Company. Collectively the companies are referred to as Kuvare.
KBRA said: "The Watch Developing status reflects the uncertainty with respect to the near- and medium- term impact on Kuvare’s financial position, projected results, and business strategy considering the announcement earlier today that Blue Owl Capital Inc. (Blue Owl) made a long-term investment in Kuvare by purchasing $250 million preferred shares."
Upon closing of the KAM acquisition, most KAM employees are expected to join Blue Owl, the companies said. In addition, there is potential for up to a $250 million earnout subject to certain adjustments and achievements of future revenue targets.
Ardea Partners LP and PJT Partners LP are serving as lead financial advisors to Blue Owl in connection with the transactions. BofA Securities, BMO Capital Markets Corp., Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, Mizuho and its affiliate Greenhill & Co, Morgan Stanley & Co. LLC, and Truist Securities, Inc. are also acting as co-financial advisors to Blue Owl. Kirkland & Ellis LLP acted as legal advisor to Blue Owl.
J.P. Morgan Securities LLC is acting as lead financial advisor to KAM, and as co-placement agent on the investment in Kuvare. RBC is acting as financial advisor to Kuvare and as co-placement agent on the investment in Kuvare. Sidley Austin LLP acted as legal advisor to Kuvare.
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