Private Equity Value Creation in Finance: Evidence from Life Insurance

“Safe” Annuity Retirement Products and a Possible US Retirement Crisis

“…Political influence plays a big role in insurance company regulation at the state level (Perez 2016). A recent paper suggests that when private equity firms buy insurance companies it introduces risks that rating agencies appear to ignore (Kirti and Sarin 2020).…”

“…Those insurers have increased illiquid investments in complex structured products used to fund leverage in other sectors of the economy. Kirti and Sarin (2020) demonstrate that once a takeover transaction is finalized, the investment portfolios of PE-influenced life insurers quickly move to riskier assets such as private asset-backed securities (ABS). Cortes, Diaby, and Windsor (2023) write that PE firms love the ability to bypass ratings agencies and rate investments themselves under insurance laws.…”

“…"…PE firms' direct premiums from their insurance subsidiaries toward risky alternative investments, like ownership stakes in other portfolio companies. It is possible that some of the benefits from capital and tax savings that PE-backed insurers receive enable them to price more aggressively relative to their competitors and capture greater market share (Kirti and Sarin 2020). "…”

Private Equity and Financial Stability: Evidence from Failed Bank Resolution in the Crisis

“…This paper connects to several strands of literature. It is related to an extensive literature that studies the role of private equity in the economy (e.g., Kaplan, 1989;Lichtenberg and Siegel, 1990;John Lang and Netter, 1992;Boucly, Sraer, and Thesmar, 2011;Lerner et al, 2011;Cohn, Hotchkiss and Towery, 2013;Davis et al, 2014;Bernstein and Sheen, 2016;DeYoung et al, 2018), and particularly in some regulated industries in recent work (e.g., Eaton, Howell, and Yannelis, 2019;Kirti and Sarin, 2020;Gandhi, Song, and Upadrashta, 2021;Gupta et al, 2021). These studies mostly focus on firms and almost exclusively on normal times, while our focus is on the distressed state of the world.…”

Private Equity and Financial Stability: Evidence from Failed Bank Resolution in the Crisis

“…This paper connects to several strands of literature. It is related to an extensive literature that studies the role of private equity in the economy (e.g., Kaplan, 1989;Lichtenberg and Siegel, 1990;John Lang and Netter, 1992;Boucly, Sraer, and Thesmar, 2011;Lerner et al, 2011;Cohn, Hotchkiss and Towery, 2013;Davis et al, 2014;Bernstein and Sheen, 2016;DeYoung et al, 2018), and particularly in some regulated industries in recent work (e.g., Eaton, Howell, and Yannelis, 2019;Kirti and Sarin, 2020;Gandhi, Song, and Upadrashta, 2021;Gupta et al, 2021). These studies mostly focus on firms and almost exclusively on normal times, while our focus is on the distressed state of the world.…”