Private Credit Holdings Surge in US Life/Annuity Market

Strategic Insights -

US life/annuity (L/A) insurers significantly increased private credit holdings by 6% in 2024, with the total level more than doubling over the past decade. This growth is largely driven by nonbank lenders, such as private equity and asset manager firms, filling the gaps left by traditional bank lenders stepping back from commercial loans. The increased volume of private credit holdings includes securities subject to limitations under the Securities and Exchange Commission's Rule 144a, allowing issuers to avoid initial public offerings.

Key Takeaways:

  • Private credit holdings in the US life/annuity market increased by 6% in 2024, more than doubling over the past decade.
  • Nonbank lenders, such as private equity and asset manager firms, have filled the gaps left by traditional bank lenders stepping back from commercial loans.
  • Private placement bonds grew 6.3% to nearly $1.8 trillion in 2024, accounting for over 45% of the L/A industry's bonds.
  • Non-144a private placement holdings topped $950 billion in 2024, accounting for 24% of the sector's bond portfolio and 17% of invested assets.
  • Structured non-Mortgage-Backed Securities (non-MBS) accounted for 28% of private credit holdings in 2024, up from 17% in 2014, with a compounded annual growth rate of 13%.
  • Insurers have shifted from issuer obligations, which involve lending directly to companies, to structured non-MBS securities, which now account for nearly half of private credit investments.
  • The report highlights a notable difference in credit quality between structured non-MBS and unaffiliated bank loans, with 54.7% of bank loans without a Private Letter Rating (PLR) being rated below investment grade.
  • Issuers with a PLR credential have a higher investment grade rating, with over 70% of unaffiliated bank loans carrying an investment grade rating, including 49% classified as NAIC-1.

Statistics:

  • Private credit holdings in the US life/annuity market increased by 6% in 2024.
  • Private placement bonds grew 6.3% to nearly $1.8 trillion in 2024, accounting for over 45% of the L/A industry's bonds.
  • Non-144a private placement holdings topped $950 billion in 2024, accounting for 24% of the sector's bond portfolio and 17% of invested assets.
  • Structured non-MBS securities accounted for 28% of private credit holdings in 2024, up from 17% in 2014, with a compounded annual growth rate of 13%.
  • 54.7% of bank loans without a PLR were rated below investment grade.
  • Over 70% of bank loans with a PLR carried an investment grade rating, including 49% classified as NAIC-1.

Sources:

  • "U.S. Life/Annuity Insurers Increase Private Credit Holdings, According to a New AM Best Report" by AM Best
  • BusinessWire.com: "AM Best: US Life/Annuity Insurers Increase Private Credit Holdings" by BusinessWire.com
  • www.ambest.com: "About AM Best" by AM Best Rating Services, Inc.
  • https://www.businesswire.com/news/home/20251020450702/en/