Total cash and invested assets of PE-owned US insurers increase by 7% to $343.5bn

Written by Adam Cadle

14/08/2020

Total cash and invested assets of private equity (PE)-owned US insurers increased 7% to $343.5bn at year-end 2019 from $313.9bn at year-end 2018.

According to figures published by the NAIC, there were a total of 89 PE-owned US insurers at year-end 2019, relatively consistent with year-end 2018. Bonds were the largest asset type, at 74% of total cash and invested assets of PE-owned US insurers; corporate bonds were the largest bond type at about 41% of total bonds; and life companies accounted for almost all of the exposure.

The concentration of asset-backed securities (ABS) and other structured securities (which includes CLOs) as well as residential mortgage-backed securities (RMBS) is higher for PE-owned insurers at an aggregate 33% of total bonds held by PE-owned insurers, compared to 11% total bonds for the overall US insurance industry at year-end 2019.

The NAIC said: “The trend with PE firms acquiring US insurers has continued over the past few years due, in part, to the lower-for-longer interest rate environment. Both sides sought benefits: PE firms are attracted to the additional, steady source of premium income from the insurers; and US insurers’ investment portfolios can potentially achieve higher investment returns and improved access to capital via the PE firms’ capital markets networks.”

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