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UK insurer Legal & General has struck a private credit partnership with Blackstone that the US alternative assets giant said could be worth up to $20bn by the end of the decade.
Blackstone will source private credit deals for the FTSE 100 company’s annuities business, in the latest example of European insurance and pension groups tapping US private capital groups to increase their exposure to a fast-growing asset class.
Under the agreement, L&G’s annuities business will use Blackstone to source investment-grade private credit deals, mostly from the US, the companies said, with L&G investing up to 10 per cent of new flows from its annuities business.
L&G said the annuities origination agreement could be worth £1bn to £1.5bn each year over the next five years. The insurer’s asset management business also plans to develop “public-private hybrid” credit products as part of the partnership.
L&G chief executive António Simões said the insurer would benefit from “a more diverse pipeline of assets for our annuity book, and growth in asset management”.
The £1.1tn insurer has been pushing into private markets under Simões, including taking a 75 per cent stake in $3.5bn global real estate private equity group Proprium Capital Partners this year.
That deal came after it poached Eric Adler from US insurer Prudential to lead its asset management division, having combined the unit with its private markets business.
L&G said its asset management partnership with Blackstone to develop “hybrid” credit products could offer clients in its wealth and wholesale businesses potentially higher returns, with more liquidity.
The Blackstone tie-up comes a week after Bermuda-based Athora, backed by US private capital group Apollo, announced an agreement to acquire the UK’s Pension Insurance Corporation.
The deal related to the lucrative insurance niche of bulk annuities, a market that is booming, with British companies expected to offload about £500bn of retirement obligations and the assets backing them to insurers over the next decade.
Blackstone has proved more attractive to some asset managers because it is not regarded as having the same potential conflicts of interest as rival fund managers, such as Apollo and KKR, that own an insurance business outright while managing assets for others, in exchange for a fee.
The group previously owned about a third of Rothesay, a pension insurer and PIC rival, which it sold in 2020 to Singapore’s sovereign wealth fund GIC and US insurer MassMutual, in a deal that valued Rothesay at £5.75bn.