There's something about insurance.

That's right, the insurance business these days reminds me of Cameron Diaz's character in the 1990s rom-com There's Something About Mary. Just as everyone wants Mary, everyone wants insurance, especially sophisticated investors-starting with Warren Buffett on the property-and-casualty side and Apollo Global Management on the life insurance side.

The reason is simple. Insurers are multitrillion-dollar pools of capital, steeped in complexity, historically in a sleepy corner of finance, operating under the auspices of 50 different state regulators. It's an optimal environment for the sharp-pencil set to work their magic, a trend now reshaping the industry.

While some of these players seem to be marching right along, at least one has tripped up, that being Mark Walter, CEO of Guggenheim Partners and TWG Global, where a web of life insurers and related financial companies is the focus of a federal investigation.

The feds are looking into whether loans made by Walter-linked insurance operations to other Walter-controlled entities should have been classified as "unaffiliated." An insurance company can lend money to another company that is related to it, but the loan must be classified as "affiliated." Walter's companies, the feds allege, failed to do that in some cases. News of the probe apparently stressed Walter's world to the point that the suddenly cash-strapped billionaire had to sell the Los Angeles Lakers. He still owns the Los Angeles Dodgers and other sports properties.

The hybrid news outlet/investment firm Hunterbrook has reported on transactions that again weren't classified as affiliated, between Walter-controlled companies and an insurance company, EquiTrust, that was sold to Earvin "Magic" Johnson, a co-owner of the Dodgers. Johnson sold EquiTrust last year. (Hunterbrook says that as of Aug. 26, it had a short position in the Guggenheim Strategic Opportunities fund.) In 2018, The Wall Street Journal called the Dodgers' ownership structure "unusual," "unorthodox," and "convoluted," adding it "drew scrutiny from regulators."

Earlier this year, the CEO of a sizable private-equity firm told me he could never figure out how Guggenheim was "making all that money." Think about Walter this way: Here's a guy who controls a privately held private-equity company with insurance operations (Guggenheim), and then creates another privately held investment company with insurance operations $(TWG)$, and aligns himself with a galaxy of financial companies and moves money around them vigorously. What's up with that?

TWG issued a news release saying there was "no fraud" and that "multipronged attacks against TWG have been advanced by unnamed sources with self-serving interests." Guggenheim declined to comment. Johnson's company didn't respond to a request for comment. Regardless, Walter's world is, without question, hideously complicated.

A protagonist from the marching-right-along camp can be found in Money to Burn: The Unvarnished Truth About Leon Black, Apollo, and the Rise of a New Wall Street, a book by Bill Cohan out this past week. Apollo, you may recall, began its life by buying Executive Life, an insurer crippled in the wake of Drexel Burnham's collapse. More recently Apollo is betting heavily again on another life insurer, Athene Holding, the nation's largest seller of fixed annuities.

Apollo's deal to buy Executive Life was controversial and, you guessed it, complicated. It was also tied to 16 years of litigation between the French bank Crédit Lyonnais-Apollo's sometimes partner in the deal-and the U.S. government, which Institutional Investor characterized as "fiendishly complex." (Seeing a trend?)

It's a world in which Apollo CEO Marc Rowan thrives. "Marc cut his teeth on the Executive Life deal," Cohan tells me. "It gave him a fundamental understanding of the business, and helped him recognize the opportunity of Athene." Apollo first invested $16 million in Athene, then a start-up, in 2009 and bought out the entirety in 2022, along the way creating a powerhouse which has generated billions of dollars of cash for Apollo.

PE firms say insurers like Athene are a form of permanent capital, as opposed to beating the bushes to raise money for a fund. Athene pays top-tier rates on its annuities because it invests premiums in longer-term private-credit deals, which Apollo will tell you mitigates additional risk.

Other alt firms like KKR, Canada's Brookfield, and recently Third Point Investors have bought insurance and annuity businesses, sometimes employing a strategy the Retirement Income Journal calls the "Bermuda Triangle," or "the synergistic linking of U.S. annuities, private credit, and offshore reinsurance."

"It takes a certain amount of financial engineering to design those products, and they are very opaque," says Bain partner Andrew Schwedel. "I don't think that complexity is due to the PE-backed guys going into the business. It's embedded in the nature of what the business has become."

The P&C business, too, is experiencing unconventional interest these days. Call it Buffettwannabeitis. Brookfield is looking to grow its P&C business more than tenfold, according to CEO Bruce Flatt.

Bill Ackman, CEO of Pershing Square Capital Management, recently bought specialty insurer Vantage Group. "Learning from Mr. Buffett, we've taken a similar approach and began a search either for a management team to build a business around, or for an existing company we could acquire at a price that made sense and use as the core of this platform," Ackman said on a conference call to investors. Baby Berkshires like Markel Group and Fairfax Financial have had insurance operations for years.

"It's so much fun because you get the money at the start, and then you find out whether you've done something stupid later on," Buffett said of the insurance business.

For Mark Walter, though, it's not exactly a rom-com at the moment.