The Canada Pension Plan Investment Board denies a shift in investment strategy, but has announced it would pay US$1.8-billion for its first direct investment in the insurance business.
But the purchase of Wilson Re, valued at $2.015 billion Canadian, doesn’t represent a shift in strategy at CPPIB, senior vice-president of private investment Andre Bourbonnais told reporters.
“It’s really an acquisition vehicle for us. It’s not a traditional operating company,” Bourbonnais told the Financial Post. “Closed-block life insurance is an asset class with attractive risk-adjusted returns, well-suited to our long-term horizon.”
Currently the CPPIB invests funds not needed to pay current benefits of the Canada Pension Plan.
Wilton Re specializes in purchasing a type of life insurance portfolio that is viewed as an asset class; and the CPPIB plans to extend further capital to increase the size of the business.
The first large acquisition for CPPIB since it purchased Neiman Marcus Group Ltd. last fall, Friday’s move appears to represent a shift in strategy because the Canadian pension has historically teamed up with a large partner on private investments outside Canada. (continued.)
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The CPPIB partnered with Ares Management LLC on the US$6-billion Neiman purchase, whereas only Wilton Re’s management is involved in last week’s deal.
The acquisition of Wilton Re will also help to diversify the CPP fund, which has many investments whose performance is closely correlated with movements in the stock market, says Bourbonnais.
By contrast, the reinsurer’s performance relies on elements such as demographics and the accuracy of actuarial tables.
