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Private Equity Firms Bet on Insurance

Insurance businesses have permanent capital, drive growth, and make solid investments for private equity firms, according to PitchBook.

Major publicly traded private equity firms’ assets under management are growing, largely thanks to investments in insurance companies.  

A new analysis from PitchBook of five major private equity firms’ second-quarter earnings calls shows that these firms are increasingly interested in buying and investing in insurance companies — and they don’t show signs of letting up soon.  

“Insurance companies have the potential to meaningfully add to a general partner’s permanent capital, drive AUM growth, and make solid investments if their float is invested well — just as Berkshire Hathaway has done with many of its insurance holdings,” the data provider said in a new report published Wednesday.   

According to PitchBook, these traits mean a rush into the insurance industry will likely continue in the coming years.    

In early July, Kohlberg Kravis Roberts & Co. announced that it was acquiring Global Atlantic Financial Group, a retirement and life insurance provider with over $70 billion in invested assets. This deal “meaningfully accelerates” the company’s goal of increasing its permanent capital base, according to Scott Nuttall, co-president and co-chief operating officer at KKR, who spoke about the deal on an early July call

Blackstone, for its part, has $62 billion in insurance assets, president and chief operating officer Jon Gray said during the firm’s second-quarter earnings call.  

“After hiring former Global Atlantic CIO, Gilles Dellaert, in January, the firm likely sees a healthy runway in growing its insurance solutions business,” PitchBook said.  

According to PitchBook, Apollo’s assets under management increased by nearly $100 billion between the first and second quarters largely because of insurance transactions executed by European insurer Athora and life insurance provider Athene, for which Apollo manages assets.  

Apollo’s permanent capital vehicles, including these, now account for nearly 60 percent of firm-wide assets under management, according to its second-quarter earnings call. Firm co-founder Leon Black said during Apollo’s earnings call that the company now has a team of over 100 employees who are “totally focused on insurance.” 

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Meanwhile, the Carlyle Group completed its acquisition of Fortitude Re, a reinsurance business, in June, according to its most recent earnings call. According to PitchBook, Carlyle expects the deal to rotate $4 billion into its funds in the near term — a figure that’s projected grow to $6 billion by 2021.  

“Fortitude is performing well, and we expect it will be an important source of growth moving forward,” Kewsong Lee, co-CEO and director at Carlyle, said during the fim’s earnings call.  

Ares is in the midst of growing its insurance business too, although its acquisition of Pavonia Life Insurance has been delayed, according to PitchBook.  

“We’re as bullish as we’ve ever been about the insurance opportunity,” co-founder and CEO Michael Arougheti said during Ares’ latest earnings call, according to PitchBook.  

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