Private Equity (PE)-Owned U.S. Insurers’ Investments Decrease as of Year-End
2021; Number of PE-Owned U.S. Insurers Increases

Link: https://content.naic.org/sites/default/files/capital-markets-special-reports-PE-owned-YE2021.pdf

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Excerpt:

The BACV of total cash and invested assets for PE-owned insurers was about 6% of the U.S. insurance
industry’s $8.0 trillion at year-end 2021, down slightly from 6.5% of total cash and invested assets at
year-end 2020. The number of PE-owned insurers, however, increased to 132 in 2021 from 117 in 2020,
but they were about 3% of the total number of legal entity insurers at both year-end 2021 and year-end 2020.

Consistent with prior years, U.S. insurers have been identified as PE-owned via a manual process.
That is, the NAIC Capital Markets Bureau identifies PE-owned insurers to be those who reported any
percentage of ownership by a PE firm in Schedule Y, and other means of identification such as using
third-party sources, including directly from state regulators. As such, the number of U.S. insurers that
are PE-owned continues to evolve.1
Life companies continue to account for a significant proportion of PE-owned insurer investments at
year-end 2021, at 95% of total cash and invested assets (see Table 1). This represents a small decrease
from 97% at year-end 2020 (see Table 2). Notwithstanding, there was a slight increase in PE-owned
insurer investments for property/casualty (P/C) companies, to 4% at year-end 2021, compared to 3% the
prior year. In addition, there was also a small increase in total BACV for PE-owned title and health
companies’ investments, at about $1.1 billion at year-end 2021, compared to under $1 billion at yearend 2020.

Author(s): Jennifer Johnson and Jean-Baptiste Carelus

Publication Date: 19 Sept 2022

Publication Site: NAIC Special Capital Markets Reports

Equity Markets Plunge Near Bear Market Territory

Link: https://content.naic.org/sites/default/files/capital-markets-hot-spot-equity-markets-may2022.pdf

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Excerpt:

On May 19, the S&P 500 opened the day near bear market territory; i.e., at a 20% drop from a recent
high. On May 18, the S&P 500 experienced a 4% decline—the largest single-day decrease since June 2020. The last time the S&P 500 entered bear market territory was in March 2020, albeit short-lived, as
the market turned around and headed into a two-year rally that peaked in early January 2022.


The current equity market losses (and some corporate bond losses) are primarily the result of several
factors: 1) earnings reports from large American retailers, including Walmart and Target, show evidence
that the continued high inflation rate may be affecting consumer demand; 2) the war in Ukraine has
added to inflationary pressures, prompting the Federal Reserve (Fed) to increase interest rates and
reduce bond holdings; and 3) recent COVID-19 shutdowns in China have led to a slowdown in the
world’s second largest economy.

Author(s): Jennifer Johnson and Michele Wong

Publication Date: 19 May 2022

Publication Site: NAIC Capital Markets Special Report

New Inflation Rate High of 7.5% Could Affect Real Return on Investments

Link:https://content.naic.org/sites/default/files/capital-markets-hotspot-New-Inflation-High-Feb-2022.pdf

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Excerpt:

While U.S. insurance companies have adapted to investing in a world of low interest rates, they are now
also facing the challenge of investing in a high inflationary environment whereby yields may not be
providing adequate returns on investment on an inflation-adjusted basis. Using a similar approach to
estimating real interest rates in Chart 1, we estimate how corporate bond yields are holding up against
high inflation

….

Graph 3 shows similar data for BBB-rated corporate bonds. With BBB yields generally higher than A
yields, the difference between the two measures has been negative for a shorter period of time. Real
yields did not turn negative until May 2021, and they dipped to almost -1% in December 2021.

Author(s): Michele Wong and Jennifer Johnson

Publication Date: 15 Feb 2022

Publication Site: NAIC Capital Markets Bureau Hot Spot