Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Two Wall Street asset managers have emerged as final bidders for Brighthouse Financial, a life insurer viewed as a crown jewel for firms looking to boost their profiles in the private credit industry.
TPG and Aquarian Holdings, an asset manager backed by Abu Dhabi’s Mubadala Capital, both submitted offers at a small premium to Brighthouse’s market value in the final round of bidding earlier this month, according to people briefed on the matter.
Brighthouse, with more than $100bn in assets and a $3.5bn-plus market value, is one of the largest remaining independent sellers of life insurance and annuities in the US. Such insurers are coveted by asset managers to fuel the growth of their credit investment platforms, because the premiums paid by their customers provide a ready source of investment capital.
KKR, Brookfield, Apollo Global and others have snapped up insurers over the past decade.
Private capital groups invest client funds into loans, favouring them over publicly traded securities, in search of higher returns.
The sale of Brighthouse, first reported by the Financial Times in January, drew interest from many of the industry’s biggest players. Blackstone, Apollo and Carlyle weighed bids, but eventually dropped out of the process, according to people briefed on the matter. Sixth Street did bid for Brighthouse, but its offer didn’t advance, said the sources.
Some prospective bidders lost interest in Brighthouse as they conducted due diligence into its balance sheet and annuities portfolio, said people briefed on the talks.
Brighthouse has struggled to increase profits to reach its targeted capital ratios. Its focus on variable annuities, a complex product that is expensive to hedge and carries high capital charges, also tempered takeover interest, some sources previously told the FT.
Brighthouse holds legacy blocks of insurance contracts that have crimped its overall value, even as it sells new annuities that appeal to potential buyers, some of the people said.
Still, it is one of the few multibillion-dollar insurers available for a large credit firm looking to further grow its business.
One of the bidders is likely to be invited to enter exclusive negotiations in the next week. Brighthouse could also opt not to sell the company if the bids were deemed too low, two people said. Meanwhile, several larger rivals in the private capital industry including Blackstone, Carlyle, Apollo Global and Sixth Street either did not submit final bids or did not see their offers advance, said six people briefed on the talks.
Texas-based TPG, a publicly traded private equity pioneer, does not own an insurance operation. TPG might decide to divest parts of Brighthouse it does not want, two people said.
The bid by Aquarian, a New York asset manager founded by Guggenheim Partners veteran Rudy Sahay, was backed by large sovereign wealth funds, including Mubadala, the sources said.
TPG, Aquarian, Brighthouse, Apollo, Blackstone, Carlyle, Sixth Street and Mubadala Capital declined to comment. Advisers Goldman Sachs and Wells Fargo also declined to comment.
Were a sale of Brighthouse to be agreed, it would join a wave of takeovers of similar insurers. Sixth Street is working to close its acquisition of Enstar. Other large life insurance platforms, including American Equity Life, American National, Global Atlantic and Talcott Resolution have merged into alternative asset managers.
Additional reporting by Lee Harris in London