U.S. Insurers and Private Equity Investments

by Jennifer Johnson of the NAIC

"In 2012, PE firms becamesome of the most active participants in mergers and acquisitions (M&A) activity within the insurance sector, purchasing insurance companies or blocks of their businesses due, for the most part, to the predictable and steady returns, along with the opportunity to increase assets under management."

"The trend with PE firms acquiring U.S. insurers has been due in part to the low interest rate environment, whereby both sides sought benefits: PE firms taking on an additional, steady source of premium income from the insurers, and U.S. insurers’ investment portfolios potentially achieving higher investment returns and improved access to capital and asset sourcing via the PE firms’ capital markets networks, according to FitchRatings (Fitch) research.Being PE-owned, an insurer’s asset sourcing capabilities expand; however, the investments could shift towards higher returning—i.e., higher risk—assets that are also less liquid."

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U.S. Insurers and Private Equity Investments

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