The majority of private equity firms that are publicly traded have shown an impressive asset growth, off late, all thanks to investments made in insurance firms. Insurance companies have proven to be a great growth driver as they are always full of permanent capital, and therefore, are a great investment product for the private equity industry. As per a Statista study, last year, the private equity sector globally, invested about USD 6.6 billion in Insurtech firms.
According to a PitchBook study, five large US private equity firms’ 2nd quarter earnings show that these firms are increasingly gravitating towards making investments into insurance companies. Added to that, there are no signs of giving up soon on the investment spree in insurance firms. The said trend is certainly helping private equity careers of many in the M&A sub-divisions of the PE industry.
Investment Priority of PE Firms is Insurance Companies
Insurance firms hold the potential to add significantly to the permanent capital of a general partner, contribute to the growth in AUM (assets under management), and make for highly profitable investments. Berkshire Hathaway is a great example of a PE firm benefiting immensely from its insurance holdings. As per a PitchBook report, the ongoing trends suggest that the inclination towards investments into insurance industry by PE, will continue in the times to come.
Early July this year, KKR made an announcement to acquire Global Atlantic Financial Group, a retirement & life insurance firm by investing a whopping USD 70 billion. The deal is meant to help the US private equity firm significantly increase its permanent wealth base, as per Scott Nuttall, co-chief operating officer and co-president at KKR.
Blackstone & Apollo’s Grand Insurance Assets
The best private equity firms of the US like Blackstone Group and Apollo Global Management have invested heavily in the insurance sector in the recent past. In specific, the Blackstone Group currently has USD 62 billion in insurance-based assets, according to the CEO Jon Gray himself, while he spoke at the occasion of the declaration of the firm’s 2nd quarter earnings this year. As per PitchBook’s recent report, the PE firm is expecting considerable growth in the next few years in the department of insurance solutions after having roped in Gilles Dellaert, the former CIO of Global Atlantic.
Steep Rise in Apollo’s Assets Owing to Insurance Investments
US private equity industry has benefited hugely from insurance-based investments lately. Perfect testimony to that would be the case with Apollo’s AUM that rose unprecedentedly as a result of the execution of insurance transactions. The said firm registered an overwhelming increase in its AUM in between the first & second quarters this year, which is a whopping USD 100 billion.
Carlyle Group’s Recent Insurance Acquisitions
Joining the party was another American PE giant, the Carlyle Group, that acquired Fortitude Rein June this year, which is a reinsurance firm. This has been found out when the said PE firm declared its latest earnings this year. As per PitchBook, the expectations of Carlyle Group with this deal is to add USD 4 billion in its existing funds, which will hopefully grow into USD 6 billion by the end of next year.
The top private equity investment professional at Carlyle – Kewsong Lee, who is the director and co-CEO of the said firm, said that Fortitude investment is doing exceedingly well for us, and we are expecting it to drive big growth for us in the near future.
Ares Management Too, Seeking New Investments into Insurance
Ares, another American investment giant in the PE sector, is planning to increase its investments into the insurance domain. However, as per PitchBook, the said PE firm’s acquisition of the life insurance firm, namely Pavonia, has got delayed due to unknown reasons.
The CEO and Co-Founder, Michael Arougheti, during the event of a declaration of the company’s latest earnings, said – “We are as hopeful of an insurance opportunity this time as we have been in the recent past”.