The third Friday in September is a special day in the financial market calendar. It’s one of the four days a year the S&P 500 index gets rebalanced. With $5.7 trillion of assets passively tracking it, how the index gets reshaped has a major bearing on markets. 

As part of its rebalancing exercise, the Committee that maintains the S&P 500 sometimes uses the occasion to change its constituents as well. They don’t have to wait until the third Friday of the month; if a company goes bust, say, the Committee can act immediately. Manufacturing company Axon Enterprise replaced First Republic three days after the bank was taken into receivership in May. But as a matter of principle, the Committee likes to avoid undue turnover of index membership and so will often monitor stock developments closely before making a move. Company size is an important determinant of eligibility, but a whole host of other criteria also come into play, ranging from domicile and listing venue to liquidity and financial viability. 

Last Friday, the S&P Index Committee announced two changes to the composition of the S&P 500. Lincoln National (LNC) and Newell Brands (NWL) were kicked out; Airbnb (ABNB) and Blackstone (BX) were ushered in. Normally, there isn’t much of a story in these changes. Newell Brands’ market capitalization had slipped to $3.8 billion, well below the $14.5 billion threshold for inclusion, while Airbnb’s had grown to $86 billion at the same time as it had been able to tick off all the other conditions for inclusion following its IPO at the end of 2020. 

With Lincoln National and Blackstone, though, there is a story. Lincoln National is one of the oldest insurance companies in America, founded in 1905 and listed in 1969. Blackstone was founded in 1985 as an alternative asset manager, and listed in 2007. For most of their history, the two firms operated in different segments of the financial services industry but recently Blackstone has begun to make waves in the insurance market. In 2018, it launched an Insurance Solutions division, inspired by the success of peer firm Apollo Global Management, and already it manages $174 billion for insurance companies, compared with the $134 billion Lincoln has on its own balance sheet. They don’t exactly compete – indeed, Lincoln is a customer of Blackstone Insurance Solutions – but the firms’ respective approach to the market reflects divergent economics in the bowels of the insurance value chain.

Blackstone’s inclusion in the S&P 500 at the expense of Lincoln highlights who’s winning, and the firm was quick to post its celebrations to social media. In Radnor, Pennsylvania, where Lincoln is headquartered, the mood was no doubt more downbeat. To understand more about the changing face of the US insurance industry, read on.