AM Best has published a new research report showing that private equity-owned insurers increased their stake in the U.S. industry’s admitted assets in 2022 by more than 15 per cent on a year-over-year basis.

The Best’s Special report, entitled Private Equity and Investment Managers Continue to Enter Life/Annuity Market, adds that “outside capital was active in entering the life/annuity segment in 2022, which helped private equity owned insurers increase their share of admitted assets.” 

The research firm states “the traditional strategy of private equity firms targeting tactical opportunities has for the most part been abandoned. The more recent model incorporates variations of majority ownership of the insurance partner and oversight of the group’s investment portfolio.”

AM Best’s associate director, Jason Hopper adds that “this approach is not exclusive to private equity firms, as investment managers are also actively participating now,” he says. “The consistent cash flows and assets that insurance companies provide appeal to asset managers with longer-term goals.” 

That said, the report goes on to point out that partnering with insurers is or should be a long-term play for investors.

“Capital providers who are impatient and lack a long-term focus will be unable to achieve their business goals,” says AM Best director, Ed Kohlberg. “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.” 

The report goes on to say no two investment management deals are the same in the industry, with each one having nuances specific to the company’s circumstances and conditions. They add that there remains a clear interest for annuity blocks and reinsurance deals. “2023 is on track for record annuity premium, which has helped bolster asset values,” they write.