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Life insurance industry’s investable assets hit $3.4 trillion

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Investable assets for the U.S. life insurance industry increased 4.0 percent in 2014, according to new research.

Conning discloses this finding in “Life Insurance Industry Investments: The Search for Yield Runs Dry.” The study examines strategic issues facing life insurers. In focusing on the industry’s portfolios, Conning looked at each major asset class and at trends and results for 449 insurers, grouped by business focus (life, annuities, accident and health, mixed, and reinsurance.)

The life industry’s investable assets increased by 4.0 percent or $130 billion between 2013 and 2014, attaining $3.4 trillion. The rise exceeded the 2.1 percent annual growth rate in assets for the one-year period.

“Many of the asset classes showed higher-than-average growth in 2014, but it is primarily the increase in the fixed income portion of the portfolio, which drove the 2014 results,” the report states.

By asset class, movements were generally increasing, with only one major asset class, real estate, showing a decrease in absolute amount. Some of these movements reverse the change seen from 2012 to 2013. Most notably, cash and short-term bonds increased, after a relatively large decrease from 2012 to 2013. In 2014, cash and short-term bonds increased 6.4 percent after having decreased 12.7 percent between 2012 and 2013.

Asset types increased in 2014, at rates higher than their 2010-2014 compound annual growth rates (CAGRs). Mortgages edged up 5.6 percent and long-term bonds rose 3.4 percent.

Statutory impairments continued to decrease in 2014, continuing their recovery from the financial crisis. Impairments on investable assets totaled about $2.0 billion in 2014, comparing favorably to $58 billion in 2008, the historic high point in the immediate wake of the prior financial crisis, the report shows.

Among the study’s additional findings:

  • Over the study period of 2010-2014, allocations to mortgages increased to 11.3 percent from 10.1 percent of investable assets.

  • Industry-wide allocations to residential mortgage-backed securities (RMBS) decreased steadily over the study period, to 9.3 percent in 2014 from a 14.0 percent in 2010.

  • Allocations to commercial mortgage-backed securities (CMBS) increased to 5.1 percent of total bonds in 2014 from 4.8 percent in 2010, achieving a peak of 6.0 percent in 2011.

  • Allocations of asset-backed securities (ABS) rose to 6.7 percent in 2014 from 5.6 percent of bonds in 2010.

“[Historically low interest rates] have taken [a] toll on investment results for the industry,” the report states. “In 2014, gross book yield decreased once again for the life-annuity industry. Insurers have been navigating the low rate environment with lessons learned in the actions leading up to the financial crisis, where reaching for yield led to unseen risks in the asset portfolio.”


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