U.S. health insurers have been coping with low returns on bonds by putting more of their investment portfolios in stocks, and in what regulators classify as “alternative investments.”
Analysts at Patpatia & Associates Inc. look at the shift in health insurers’ portfolio allocations between 2008 and 2013 in a new report on insurer asset management strategies.
The analysts note that, in many ways, health insurers are more like manufacturers or retailers when it comes to asset management than they are like life and annuity issuers.
Life and annuity issuers use investment returns on about $2 trillion in general account assets to back their obligations to policyholders and annuity contract holders.
Health insurers rely heavily on the premiums paid during a given year to pay the claims incurred during that year. Health insurers’ asset managers tend to focus on keeping large amounts of cash and very liquid investments available to pay the bills, and putting some case in longer-term instruments to protect against claim spikes and increase corporate returns, the Patpatia analysts say.
The U.S. economy was starting to melt down in 2008.
See also: Conning Assesses Effects Of Bond Woes