Private equity-owned insurers have significantly expanded their influence in the life/annuity sector, marking a substantial 15% year-over-year growth in their share of admitted assets in 2022, according to AM Best.
This surge in private equity involvement was driven by heightened activity in the life/annuity segment, with a particular emphasis on strong annuity premium growth at key players like Athene and Global Atlantic.
The trend, however, was further amplified by noteworthy acquisitions within the industry, with the momentum persisting into 2023.
Contrary to the traditional approach of private equity firms targeting tactical opportunities, the current model involves variations of majority ownership and oversight of the investment portfolio.
Investment managers are also actively participating in this evolving landscape, drawn by the consistent cash flows and assets provided by insurance companies with longer-term goals.
According to Jason Hopper, associate director at AM Best, “The consistent cash flows and assets that insurance companies provide appeal to asset managers with longer-term goals.”
The changing interest rate environment since March 2022 has contributed to this shift, altering pricing dynamics and the credit cycle.
The report underscores that acquiring and partnering with life-annuity insurers is a strategic, long-term play. Ownership structure, while significant, doesn’t drastically alter the risk profile as much as the insurer’s strategic plan and activities.
Key factors such as cash flow management, sustainable premium growth, and robust asset-liability and enterprise risk management are crucial for success.
Ed Kohlberg, director at AM Best, emphasised, “Capital providers who are impatient and lack a long-term focus will be unable to achieve their business goals. New market participants will need to understand the long-term nature of the segment and be prepared to provide the appropriate customer and capital support for the underlying business.”
