Fortitude Re Announces Long-Term Care and Individual Disability Insurance Reinsurance Agreement with Unum Group

Rhea-AI Summary

Fortitude Re has signed a significant reinsurance agreement with Unum Group (NYSE: UNM), set to take effect January 1, 2025. Under the agreement, Unum will cede $3.4 billion of individual long-term care (LTC) statutory reserves and approximately $120 million of multi-life individual disability insurance (IDI) in-force premium to Fortitude Reinsurance Company

The transaction represents 19% of Unum Group's total LTC block and 20% of its in-force IDI premium. Unum will maintain service and administration of the reinsured policies. Notably, Fortitude Re will simultaneously enter into a retrocession agreement to transfer 100% of the LTC and IDI insurance risks to a highly rated global reinsurance partner, retaining only the spread-based risks associated with this business block.

Positive

• Risk reduction through transfer of $3.4B LTC reserves
• Reduction of 19% exposure to LTC portfolio
• Transfer of 20% IDI premium risk

Negative

• None.

Insights

Financial Analyst

Unum Group's reinsurance agreement with Fortitude Re represents a significant de-risking transaction involving $3.4 billion of long-term care reserves and $120 million of disability insurance premium. This deal affects 19% of Unum's total LTC exposure and 20% of its IDI premium base.

The transaction's structure is particularly noteworthy. While Fortitude Re will assume these liabilities from Unum, it's immediately transferring all insurance risks to an unnamed global reinsurer, retaining only the spread-based risks (essentially the investment margin between assets backing the liabilities and the cost of those liabilities). This multi-party arrangement suggests a specialized deal structure designed to optimize capital efficiency for all parties.

For Unum, this transaction likely delivers several key benefits:

• Improved risk-based capital ratios by reducing exposure to LTC liabilities, which have historically been volatile and capital-intensive
• Potential release of trapped capital that can be redeployed for share repurchases, dividends, or growth initiatives
• Reduced earnings volatility from LTC claims experience while maintaining customer relationships

The timing is strategic, coming when Unum's stock has performed well and the company likely has negotiating leverage. The transaction represents approximately 25% of Unum's market capitalization, making this a material development that should positively impact the company's risk profile.

This deal aligns with the broader industry trend of insurers managing legacy LTC blocks through reinsurance rather than direct sales, allowing companies to reduce risk while maintaining customer relationships and administrative capabilities.

HAMILTON, Bermuda--(BUSINESS WIRE)-- FGH Parent, L.P., (together with its subsidiaries, “Fortitude Re”), a leading global reinsurance company, today announced the signing of a reinsurance transaction between its subsidiary, Fortitude Reinsurance Company Ltd. (“FRL”) and Unum Life Insurance Company of America (“Unum”), a subsidiary of Unum Group (NYSE: UNM).

Upon receipt of regulatory approvals and subject to satisfaction or waiver of certain other customary closing conditions, Unum will cede to FRL, effective as of January 1, 2025, $3.4 billion of individual long-term care (“LTC”) statutory reserves and approximately $120 million of Unum Group’s multi-life individual disability insurance (“IDI”) in-force premium. The cession represents 19% of Unum Group’s total LTC block and 20% of its in-force IDI premium.

Unum will continue to service and administer the reinsured policies. Simultaneously with the closing of the reinsurance transaction with Unum, FRL will enter into an agreement to retrocede 100% of the LTC and IDI insurance risks to a highly rated global reinsurance partner. FRL will therefore retain only the underlying spread-based risks associated with this block of business.

“Today’s announcement underscores the deliberate approach we have taken toward growth,” said Alon Neches, CEO, Fortitude Re. “When partners like Unum place their trust in us, we ensure the value delivered honors that trust. I would like to extend a special thank you to the many professionals who have collaborated and worked tirelessly to achieve this important milestone.”

Sidley Austin LLP served as legal counsel to Fortitude Re.

About Fortitude Re

Fortitude Re is a leading provider of reinsurance solutions with $106 billion in total assets as of Dec. 31, 2024. The foundations of our business model are our exceptional insurance professionals and the support of the world’s most sophisticated insurance investors, including Carlyle and T&D Insurance Group. Our people, our capital strength and our capabilities drive strategic reinsurance solutions designed to meet our clients’ highest priority goals and to create sustainable, long-term value for our shareholders, our teammates, and the communities in which we operate. For more information visit, www.fortitude-re.com and follow Fortitude Re on LinkedIn.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250227798233/en/

Media Contact

Mary Beth Conklin

Marybeth.conklin@fortitude-re.com

423-596-1449

Source: Fortitude Reinsurance Company Ltd.

FAQ

What is the value of Unum Group's (UNM) reinsurance deal with Fortitude Re?

The deal includes $3.4 billion of LTC statutory reserves and $120 million of IDI in-force premium, effective January 1, 2025.

What percentage of Unum's (UNM) insurance portfolio is being reinsured by Fortitude Re?

The agreement covers 19% of Unum's total LTC block and 20% of its in-force IDI premium.

Will Unum (UNM) continue to manage the reinsured policies after the Fortitude Re deal?

Yes, Unum will continue to service and administer the reinsured policies.

How is Fortitude Re managing the risk from Unum's (UNM) reinsurance agreement?

Fortitude Re will retrocede 100% of the LTC and IDI insurance risks to a global reinsurance partner, keeping only spread-based risks.