Insurers See Themselves Shielded From Private Credit Worries

Top executives at some of Europe’s biggest insurance companies acknowledged widespread concern about private credit while seeking to reassure investors about their own investments in the asset class.

Markets are worried “that when things don’t go well in the economy, there could be some fallout from private credit,” AXA SA Chief Executive Officer Thomas Buberl said Thursday on Bloomberg TV. Buberl also said that AXA’s exposure to the asset class is “far below” that of the competition because the firm had been “very mindful in the past.”

Allianz SE Chief Financial Officer Claire-Marie Coste-Lepoutre echoed those comments in another interview, saying that the company is “separating” itself from some trends in the private credit market. She’s “very comfortable” with Allianz’s exposure, she said.

The $1.8 trillion private credit industry has been rattled in recent weeks after Blue Owl Capital Inc. decided to shut the gates on one of its funds and began selling assets to return cash to investors instead. The market has also been hit by worries about overspending on artificial intelligence, the technology’s disruptive power and lending standards more broadly.

“The problem in private credit started when people were trying to create the illusion of liquidity in something that inherently doesn’t have liquidity,” Allianz CEO Oliver Baete said in a separate interview.

Almost a quarter of Allianz’s €603 billion ($711 billion) worth of debt investments were in unlisted instruments, according to a fourth-quarter earnings document published Thursday. Most of those investments were in mortgages, infrastructure and private placements.

AXA, which disclosed invested assets totaling €450 billion on Thursday, said €121 billion of that was in corporate bonds and loans, €31 billion in mortgages and €25 billion in asset-backed securities such as collateralized loan obligations. It didn’t break down its exposure to private markets specifically.

AXA Group Chief Investment Officer Jean-Baptiste Tricot said in an interview in December that about 14% of total investments are allocated to private and structured credit, with more than half of that consisting of senior tranches in CLOs or European mortgages. He also said that about 84% of the private credit portfolio is investment grade.

Many concerns about private credit stem from loans “to businesses that don’t deserve them” such as First Brands, Allianz CEO Baete said. The German insurer has “almost zero exposure to the high-leverage segment,” he said.

Photograph: AXA Chief Executive Officer Thomas Buberl; Photo credit: Chris Ratcliffe/Bloomberg