Insurance companies constitute a sizeable proportion of the real estate institutional investor landscape. The assets under management of insurance companies active in real estate totalled $13.2tn, representing 26% of the $50.2tn total assets under management of all LPs currently allocating to real estate. A number of insurance companies with combined total assets under management of $800bn are also considering making maiden investments in real estate.
Thrity seven percent of insurance companies have less than $10bn in total assets under management, 34% have between $10-49.99bn, and 29% have $50bn or more in total assets. An example of a large insurance company that commits to private real estate funds is R+V Lebensversicherung. This German insurance firm with €65bn in total assets, has €1.4bn invested in private real estate funds.
As of January 2012, the average allocation to real estate of these insurance companies was 6.6% of total assets; however the target allocation to real estate amounted to around 9.9%. Of the 223 insurance companies that invest in real estate tracked by Preqin, 67% invest or are considering investing in direct real estate, 61% invest or are considering investing in private real estate funds, and 18% invest in listed property.
In terms of overall allocations to real estate, 40% of insurance companies have less than $500mn invested in the asset class. Around 16% have real estate portfolios worth between $500-999mn, with 28% of insurance companies investing between $1bn-4.99bn. A sizeable 16% of insurance companies have allocated over $5bn to the real estate asset class, demonstrating the ability and scope of such investors to build and maintain expansive real estate portfolios. An example of an insurance company with a significant allocation to real estate is BNP Assurances. Its $5.1bn real estate portfolio is split 60% to direct real estate, 10% to listed real estate and 30% to private real estate funds.
The geographical distribution of insurance companies is quite varied, with 24% based in North America. The majority of insurance companies that invest in real estate are located in Europe (54%), with 22% located in Asia and Rest of World.
Insurance companies have a strong preference for value added vehicles with 60% of firms stating a preference for this strategy, while 57% have exhibited an interest in core funds. 51% of insurance companies also give strong consideration to opportunistic strategies. CIGNA, a $46bn US-based insurance firm, invests across direct, listed, and private real estate. The insurance company has a preference for core, core-plus, opportunistic, value added, and debt strategies, and has a regional preference for North America. Distressed and fund of funds strategies are least favoured by insurance companies.