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Blackstone Doubles Insurer Assets, Faces Questions About Role

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What You Need to Know

  • Blackstone now manages about $155 billion in assets for insurers.
  • In the past year, the insurer asset total has doubled.
  • Jon Gray, Blackstone's president, said he could not see the company assuming large amounts of liabilities.

Blackstone loves managing assets for insurers, but it has no interest in assuming a large amount of investment risk itself.

Blackstone Executives talked about the skin-in-the-game idea Thursday, during a conference call the company held to go over first-quarter earnings with securities analysts.

Patrick Davitt, an analyst with Autonomous Research, asked Blackstone executives Thursday about reports that some insurance regulators have concerns about independent money managers’ role in handling insurers’ investments.

“Some observers have suggested that an outcome of these reviews could be a requirement of more skin in the game for the managers, particularly those that aren’t consolidated with their insurance counterparties,” Davitt said. “So, first, what is your position on this focus? Do you think there’s a risk that regulators will require more skin in the game?”

Jon Gray, Blackstone’s president, said BlackRock, Goldman Sachs and other investment companies have a long history of managing assets for insurers.

“I don’t foresee regulators requiring that they essentially make investments in order to be investment managers,” Gray said.

Blackstone sometimes invests alongside insurance company customers, with a minority stake in deals, but he said he could not envision Blackstone “becoming balance sheet-heavy” and taking on hundreds of billions of dollars in extra liabilities of its own.

“That’s not something we would be willing to do,” Gray said.

What It Means

Many of the life insurance policies and annuities you sell may contain assets managed by Blackstone or other money managers. It might be useful to watch how those money managers are doing.

The Earnings

Blackstone is reporting $3.4 billion in net income for the first quarter on $5.3 billion in revenue, compared with $2.5 billion in net income on $5.2 billion in revenue for the first quarter of 2021.

Total assets under management increased 41%, to $916 billion.

Blackstone reported that it now manages about $155 billion in assets for insurers, and that assets under management at the Blackstone unit that serves insurers has doubled in size in the past year.

Life insurance and annuity issuers tend to have much bigger investment portfolios than health insurers or property and casualty insurers, and most of the Blackstone insurer asset total appears to come from life and annuity issuers.

Michael Chae, Blackstone’s chief financial officer, said the company is happy with its approach to the insurance asset management market.

“What you are seeing increasingly in life and annuities is a recognition that the asset management capability part of the equation is essential to being competitive in the marketplace day-to-day,” Chae said.

Blackstone believes it has been a great solution provider for those life and annuity clients, Chae said.

(Photo: Mark Abramson/Bloomberg)


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