Annuity Issuer Invests $1B in Midsize Firms

American Equity Investment Life is putting $1 billion in a new arrangement that will provide credit for midsize U.S. businesses.

The West Des Moines, Iowa-based fixed annuity issuer has invested the cash in ASP Summa, a collateralized loan obligation set up by Adams Street Partners, a Chicago-based investment firm.

ASP Summa will invest in loans made to midsize companies that are controlled by private equity firms.

What it means: Some life insurance industry watchers have wondered whether it’s good for life insurers to move away from a traditionally tight focus on bonds issued by large corporations with high credit ratings.

But many life insurers and their asset managers continue to see that the collateralized loan obligation market has an attractive way to diversify portfolios.

Collateralized loan obligations: A CLO is a vehicle that an investor can use to lend money to relatively small companies.

Investment firms have been looking for ways to match investors with cash and capital-hungry small businesses, because tougher bank capital standards now limit banks’ ability to meet small businesses’ need for loans.

American Equity: American Equity ended 2023 with $80 billion in assets. It began working with Adams Street to develop credit arrangement programs for midsize companies in 2021.

The firm has about $3.5 billion in CLO assets on its books.

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