US insurers' private equity investments grow by 25.8% to $117.4bn

Written by Adam Cadle

24/05/2022

US insurance companies' private equity investments grew in 2021 by 25.8% to $117.4bn, from $93.3bn in 2020 - the biggest year-over-year increase in recent years, according to AM Best.

AM Best stated that life-annuity insurers, which account for three-quarters of the US insurance industry's private equity book adjusted/carrying value, are driving the new investments, relaising widespread book value gains.

Of the $24.1bn in year-over-year growth, $12.9bn was from growth in book value from 2020 (net of disposals) and $11.2bn from new investments. The overall annual increase follows strong growth of 14.8% in 2020 and 10% in 2019.

“New investments in 2021 were concentrated in a few large organisations, with 10 insurers by book value accounting for roughly 60% of acquisitions for the year,” Jason Hopper, associate director, industry analytics and research at AM Best, said. “Furthermore, nearly a third of insurers had new investments totalling less than $5m, signalling a more-cautious approach by most of the insurers that do not have significant scale or in-house expertise with this asset class.”

The insurance industry as a whole has the greatest exposure to leveraged buyout funds, comprising roughly 58% of its private equity investments, although allocations vary by segment. Venture capital accounts for another 29%, and mezzanine financing, the remainder. All three allocations grew, driven largely by life/annuity insurers, though mezzanine funds grew by double digits for all three insurance segments.

Related Articles