An increased involvement in the insurance industry by alternative investment managers (Alt-IMs) throughout 2019 could provide benefits to both sides, with Alt-IMs gaining a steadier source of investment capital from premiums and insurers seeing higher investment returns in a lower-rate environment, according to analysts at Fitch Ratings.
2019 is expected to see Alt-IMs seeking greater exposure to life insurance through equity investments and/or investment management and sub-advisory agreements.
If priced appropriately and executed properly, Fitch believes these investments should provide Alt-IMs with increased growth in assets under management (AUM) and improved management fee stability.
Fitch also states that an increase in these kinds of tie-ups could see insurers gain access to broader deal originations, benefit from higher returns and/or free up capital by dropping under-performing legacy inforce businesses.
Furthermore, Fitch says that accessing capital through Alt-IMs instead of issuing stock in a public offering can provide insurers with capital without the challenges associated with going public, such as increased regulatory requirements and the public scrutiny of quarterly financial performance.
Apollo Global Management‘s insurance affiliates Athene and Athora accounted for 40% of its AUM, or $107 billion at 30 September 2018, up 30% year-over-year given the close of Athene’s reinsurance transaction of Voya Financial’s fixed annuity business in June 2018.
Fitch adds that Blackstone and Carlyle also have insurance affiliations. Blackstone launched Harrington Re in 2016 alongside AXIS Capital and was part of the consortium that bought Fidelity & Guaranty Life in 2017 before establishing Blackstone Insurance Solutions (BIS) in 4Q17 to provide capital-efficient investments to its insurance affiliates. BIS had $20.2 billion of AUM as of 30 September 2018.
In 2018, Carlyle purchased a 19.9% stake in Fortitude Group Holdings, whose group companies operate as Fortitude Re, from AIG.
Fitch says Fortitude Re is expected to allocate at least $6 billion of assets to investment strategies and vehicles managed by Carlyle over time.
