Aflac Is Buying a Stake in a Direct Lender, Getting a Piece of the Private Credit Boom
The insurance giant is acquiring 40% of Tree Line Capital Partners
Aflac AFL 1.37%increase; green up pointing triangle is acquiring a 40% stake in Tree Line Capital Partners, a private-credit shop focused on lending to small and medium-size companies, according to people familiar with the matter.
The details
The insurance giant is paying about $100 million for the stake, the people said. Aflac is buying existing shares in the company from Tree Line management as well as its private-equity backer, Stone Point Capital.
As part of the deal, Aflac is also making a multiyear commitment to help fund Tree Line with some of the investible cash the company collects in the form of insurance premiums from its customers, the people said.
Evercore and Berkshire Global Advisors advised on the transaction.
The rationale
Aflac was drawn to the high returns that private-credit firms have been racking up by lending to midsize businesses, people familiar with the company’s thinking said.
Tree Line’s loans are mostly made to private-equity-backed companies and come with collateral protection for the lenders in case things go wrong, the people added. By owning 40% of the firm, Aflac will also be able to earn income from dividends and benefit if the company grows in value, they said.
The context
The deal highlights the growing proximity between alternative asset managers, such as Apollo Global Management and KKR, and big insurance companies. Asset managers are looking for capital that they can deploy into new deals, while insurance companies need consistent returns so that they can pay their policyholders.
Alternative asset managers have acquired insurance companies, including Apollo’s purchase of Athene and KKR’s purchase of Global Atlantic. Insurance companies, meanwhile, are clamoring for ways to put their cash holdings to work in private credit.