NEW YORK, July 28 (Reuters Breakingviews) - Scrutiny from the umpires looms over private credit’s entire season. A federal probe into the financial empire of Mark Walter, owner of the Los Angeles Dodgers baseball team, is examining undisclosed links between investments held by his insurers and various affiliates. One of those insurers, Delaware Life, has now revealed that a heap of loans equivalent to 37% of its invested assets were in fact tied to other, Walter-backed concerns. This is an unusual and extreme case, but the industry is growing more dangerously interconnected.
Disclosure questions and concentration risk
Now, U.S. prosecutors are circling Walter’s dealings. Agents have seized a phone and a computer from Walter, following up from an initial whistleblower complaint, according to reports by and the . Delaware Life disclosed the investigations in a recent filing, along with restating roughly $16 billion of private credit assets as affiliated investments.
Questions over the firm’s disclosure practices are unique, as are the scale of its linkages to the rest of Walter’s empire. In all, as of the end of the first quarter, Delaware Life disclosed $17.8 billion in private credit investments tied to the performance of affiliated entities. In general, though, such interconnections are hardly surprising. By 2024, life insurers held $380 billion of affiliated investments, according to ratings firm AM Best, rising sharply in recent years. Of those assets, roughly a third were held by private equity-backed firms, more than any other kind of insurer.
In this case, there is no evidence that Walter’s ownership improperly influenced any transactions, and Delaware Life has undertaken internal investigations. The larger issue is concentration risk: the more policyholders’ money is funneled towards one manager’s assets, the greater the risk of correlated problems emerging. A paper by University of Texas law professor Andrew Granato and Yale doctoral fellow Pranjal Drall argues that opaque disclosures and overlapping ownership can obscure how well-capitalized insurers really are. As in baseball, investing involves far more strikeouts than home runs.
How insurers became a private credit funding source
Insurance has long been a tempting pot for wily asset managers. Warren Buffett figured out decades ago that money taken in as premiums can be invested for years before being paid back to policyholders. After the 2008 financial crisis, private equity repeated a similar trick with a weakened life insurance industry, acquiring peddlers of annuities to the masses. Guggenheim Partners, co-founded by Walter, stood up Delaware Life as part of a 2013 deal for Sun Life Financial’s business. It came amid a wave of tie-ups orchestrated by Apollo Global Management APO.N, KKR KKR.N, Brookfield and others.
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