Did Life Insurers Miss Out On Stock Market Profits?
Analysts at Conning & Company, Hartford, contend that U.S. life insurers would be better off if they had bought more common stock from 1996 to 2000.
Conning analysts note in their latest life industry investment profile that life insurers had just 1.7% of their investable assets in common stock at the end of 2000. That was about the same percentage of assets they had in common stock five years earlier, the analysts write.
Over the same five-year period, the value of stocks listed on the Standard & Poor’s 500 stock index grew more than four times as fast as life insurers’ assets. If life insurers had used a less conservative investment strategy, the value of their assets could have grown considerably faster, according to George McKeon, a Conning assistant vice president who was the lead author of the study.
Property-casualty insurers invested more of their assets in stocks and raked in bigger profits, McKeon says.
Meanwhile, he says, even as life insurers shunned the risk that stock prices might fall, many companies assumed more bond default risk by letting the quality of their bond holdings decline.
But other life insurance investment experts dispute the study’s conclusions, and not simply by pointing out that complete 2001 investment figures might make stocks look less appealing.