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The Life Insurance Market is Changing — and Private Equity Firms Are Capitalizing

by Precise Leads

April 3, 2018

Elliott Management and partner Wand Partners purchased its first life insurance company, a deal that reflects the increasingly widespread influence of private equity in insurance.

In a deal that reinforces private equity’s continued interest in the insurance business, hedge fund Elliott Management has teamed with insurance-focused private equity outfit Wand Partners to acquire Prosperity Life Insurance Group, LLC from Reservoir Capital Group and Black Diamond Capital Partners. The official announcement didn’t disclose the purchase price, but the Financial Times reported the price tag at $500 million. The deal is expected to close in the third quarter.

Prosperity’s affiliates include Shenandoah Life Insurance Co., SBLI USA Life Insurance Co., Inc., and S.USA Life Insurance Co., Inc., which have all been rated A- rating by A. M. Best. After the deal was announced, A. M. Best released a statement affirming those ratings, noting that the inflow of new capital will fuel the company’s growth and that Prosperity’s risk-adjusted capitalization levels will likely remain unchanged.

First Life Insurance Buy

The Prosperity deal marks Elliott Management’s and Wand Partners’s first joint acquisition in the realm of life insurance, but the tandem has teamed up on property casualty-related insurance deals in the past. Last year, the partners bought a controlling interest in reinsurer Aeolus Capital Management, Ltd., which followed their previous purchase of catastrophe insurer ICAT Managers, LLC.

In an interview with the Financial Times, Wand Partners Chairman Bruce Schnitzer said that his company and Elliott Management would consider other acquisitions in the life insurance sector. Large insurers in the U. S. and the U. K., he noted, are currently reviewing their balance sheets to decide “what fits and what doesn’t fit,” thereby providing the partners with opportunities for future acquisitions.

Private Equity Eyes Insurance, Annuities

Matt Popoli, Senior Managing Director at Reservoir, similarly predicted that the life insurance industry may be headed for a period of restructuring as small life insurance companies struggle with low interest rates, regulatory changes, and new technology. A rundown of recent private equity and alternative investment deals in the life insurance and annuity space indicates that the industry has moved in this direction for the past several years.

In 2013, Athene Holdings, Ltd., an entity backed by Apollo Global Management LLC, bought fixed annuity provider Aviva USA. Earlier this year, Athene expanded its position in the annuity sector by agreeing to reinsure $19 billion of fixed and fixed annuities liabilities from Voya Financial, Inc. In another annuity-private equity transaction, funds associated with Blackstone Group LP snapped up Fidelity & Guaranty Life last year for $1.84 billion.

Private equity’s widespread interest in annuities and insurance is largely prompted by its promise of a consistent stream of income. Although private equity funds invest for a specified period of time and then give their investors a return on their capital, Financial Times columnist Sujeet Indap notes that insurance premiums provide a steady flow of revenue as new policies are sold, making insurance an attractive investment option for private equity.

Indap adds that private equity is always on the prowl for new investment plays, and insurance presents a fresh opportunity. “Alternative asset managers have gathered significant assets from national wealth funds, pension funds and endowments,” he writes. “Insurance is one of the few large pots remaining to be tapped.”

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