Market Trend: Private Equity Firms Are Buying Insurance Companies

Collectively, Americans own more than 160 million individual life insurance policies. And what may be unbeknownst to many policyholders is that private equity firms looking to transition out of low-yielding investments are buying up insurers and their policies at a dizzying pace.

Typically, a life insurance company is privately held. For example, an individual or family may own the company. Or it might be owned by a group of partners or shareholders.

Private equity firms invest in companies in the hopes of increasing their value over time. Then, when it seems prudent to do so, they sell the companies to make a profit.

Insurers made 441 deals with private equity firms worth $25 billion in 2020. That number is up from 356 deals worth $22 billion from the year before. And that momentum has been continuing ever since.

The insurance company buying frenzy we’re seeing happen with private equity firms may be unsettling to policyholders who become aware of what’s happening. After all, they carefully selected insurers and trusted them with their policies and may be wary of how private equity firms invest and sell.

To put it in perspective, only about two dozen private equity firms control 50 life insurance companies out of 400. That's not an insignificant number, but it's not as staggering as policyholders might think.

It’s still a trend, though, and now even smaller private equity firms with limited resources are looking to get in on the action. And they don't necessarily have the cushion, savvy, or financial assets of larger, more experienced firms.

You can keep your clients’ best interests in mind by keeping an eye on the private equity firms and on the market. Here’s some additional reading:

• Why are asset managers and PE drawn to the insurance industry?
• Pandemic uncertainty hasn’t slowed private equity investments in insurance
• Private equity is buying up annuity and life insurance policies
• Will there be more insurance brokerage consolidation in 2022?

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