Conning: Life Insurance Industry Investments Show Results Of Rough Year

CDC & FDA Daily

The Covid-19 pandemic hit life-annuity insurers on both sides of their operations in 2020. Not only did insurers have increased death benefits and expenses to contend with, but also the asset side saw a year of interest rates dropping from already historically low levels to rock-bottom levels. Several key sectors were financially strained, affecting the large corporate bond holdings of life insurers.

The Conning Focus Series, “Life Insurance Industry Investments, 2021”, looks at the impact of the challenging economic environment of 2020 and 2021 from multiple angles. This study continues Conning’s annual reports on the life industry’s General Account assets, investigating trends in asset allocations and returns. The study summarizes industry allocations and investment results also by insurer business focus, insurer size by assets, and by 5-year performance quartiles.

“In 2020, life insurers saw the largest decrease in gross book yield since 2009,” said Mary Pat Campbell, a Vice President, Insurance Research at Conning. “Some of this drop was driven by impairments on bonds, as credit downgrade rates compared to upgrade rates were historically high. The primary driver, however, was extremely low interest rates in reaction to the Covid-19 pandemic in 2020.”

“The pressures of low interest rates continue in 2021,” added Steve Webersen, Head of Insurance Research. “Life insurers have been looking for yield by shifting asset allocations, with evidence that increased allocations to non-public bonds and to non-mortgage-backed structured securities have slowed the decreases in yields.”

The Conning Focus Series Study: “Life Insurance Industry Investments, 2021” is available for purchase from Conning by calling (888) 707-1177 or by visiting https://www.conning.com/insurance-research.