Blackstone Doubles Insurer Assets, Faces Questions About Role

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.