Yes, private equity firms have made a big splash in the life insurance industry. I believe that the largest PE-backed life insurer is Athene, which came from nowhere over the last fifteen or so years to become a major writer of annuities.Stinky - Perhaps this has been asked somewhere in the previous 62 pages, but Ive been reading a number of articles about the growing number of hedge funds buying interests in insurance companies as well as offshore reinsurance companies, and then through some highly complex arrangements and illiquid asset purchases, these insurance company/hedge funds are taking on more risk to generate higher returns on their investments. I wonder if we're starting to see in the once conservative insurance industry some of the same higher risk investments strategies that were used by banks prior to the 2008 investment banking fiasco?
PE firms seem to like the liability structures of indexed annuities and MYGAs, which promote policyholder persistency through their surrender charges and market value adjustments. Many of the insurers have also offshore reinsurance arrangements, where capital requirements may be less and structures may be more opaque.
We’re all hopeful that the US insurance regulators have a tight handle on all life insurers, including the PE-backed ones. I personally don’t see a direct line between the causes of the 2008-9 financial crisis and the current life insurer activities. But there may be other dangers lurking out there. (That’s always a good reason to keep exposure to any one insurer within state guaranty association limits).
There are two “troubled company” situations that are currently in the news. While I have no inside information, it appears to me that the Colorado Bankers situation arose because the owner, now a convicted felon, looted the company, while the Sentinel Security/Atlantic Coast situation relates to assets that the regulator believes are worth far less than their carrying value. Many prior insurance company failures, most much smaller than these, also came from “theft” or “bad assets”.
Time will tell if other companies are added to the “troubled companies” list.
Statistics: Posted by Stinky — Sun Jan 19, 2025 7:35 pm — Replies 3101 — Views 428203