Private equity firms are linking up with the insurance industry, Evan Vitale explains in his latest blog post. Firms are looking for slow, safe investments that are almost guaranteed to perform well. Evan explains how these tactics are drastically different than those used in the 1990s.
Evan talks about how investment firms are injecting capital into insurance, and are likely to see great returns once interest rates increase.
Check out the blog post on http://evanvitale.net
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Private Equity Firms Linking Up With Insurance Industry
1. Over
the
past
few
years,
private
equity
firms
are
moving
further
and
further
away
from
home
runs;
instead,
they’re
deciding
to
play
small
ball
with
some
singles
and
doubles.
2. During
the
late
1990s
and
into
the
early
2000s,
this
would
have
been
nearly
unheard
of.
3. Private
equity
firms
were
known
for
their
high-‐risk,
high-‐reward
strategies.
4. These
firms
would
take
on
massive
amounts
of
debt
to
acquire
companies
and
then
change
the
structure
by
eliminaGng
unprofitable
operaGons
while
also
puHng
more
efficient
management
strategies
in
place.
5. This
allowed
private
equity
firms
to
knock
it
out
of
the
park
when
it
came
to
the
iniGal
public
offering
(IPO).
6. Since
2011,
firms
such
as
the
Ares
Private
Equity
Group,
Blackstone
Group
and
Apollo
Global
Management
have
moved
into
a
more
secure
sector
-‐
insurance.
8. There
is
some
speculaGon,
however,
as
to
why
these
companies
are
invesGng
in
fixed
annuiGes
in
this
sector
-‐
ones
that
have
a
lower
rate
of
return.
9. However,
the
payoff
seems
to
be
evident;
by
establishing
themselves
in
the
life
and
annuity
insurance
sector,
these
private
equity
firms
are
adding
billions
in
assets.
10. This
allows
firms
to
put
their
investment
experGse
to
use,
allowing
fairly
predictable
and
steady
returns.
11. One
reason
why
these
private
equity
firms
are
jumping
into
insurance
now
is
because
of
the
realizaGon
by
insurers
that
interest
rates
are
remaining
low,
squeezing
their
profit
margins.