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Life Assets Grew More Slowly Than U.S. Wealth: Fed

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The Federal Reserve Board says assets at U.S. life insurers grew a little in the first quarter, but not as much as overall U.S. wealth. 

Life insurers held $4.35 trillion in assets in their own general accounts in the first quarter, or 3.2% more than they held in the first quarter of 2016, according to the Fed’s latest Financial Accounts of the United States report. The report is an inventory of U.S. financial assets and obligations.

Overall U.S. net wealth increased 8.8% over that same period, to $87 trillion. For the country as a whole, the market value of domestic companies was an asset that performed especially well: the total market value of U.S. companies grew 15%, to $33 trillion.

(Related: Markets Need a 30% Stock Drop or 50% Higher U.S. Yields, Or Not.)

The report includes separate statistics on the separate accounts life insurers manage for holders of variable annuity contracts and variable life insurance policies.

U.S. life insurers’ separate account assets increased 6.2%, to $2.5 trillion, according to the Fed.

Details in the Fed report suggest that the consumers who hold separate accounts may be managing their assets more conservatively than the life insurers are.

The Fed shows how much cash flowed into major categories of investments.

The life insurers themselves put about $74 billion more of their own assets into cash and holdings similar to cash in the first quarter than they took out, or 10% less than they fed into that category in the year-earlier quarter.

For separate account holders, the net flow of assets into cash and near-cash holdings was $42 billion, down just 0.2% from the total net flow for the first quarter of 2016.

The separate account holders’ caution also shaped how they allocated assets between corporate bonds and mortgage securities.

Life insurers and separate account holders took roughly the same approach to corporate bonds and foreign bonds. For both life insurers and separate account holders, the net flow of cash into that category increased about 3%.

Life insurers and separate account holders took a different approach to mortgage securities. Separate account holders increased their net flow of assets into that category just 5.8%. Life insurers increased their net flow of assets into mortgage securities by 9.5%.

— Read Northwestern Mutual Names Transformation Chief on ThinkAdvisor.


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