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Some Insurance Fund Managers Have a Toe in Russia

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What You Need to Know

  • Life insurers have little direct exposure to Russia.
  • Some small insurer-run mutual funds and variable life and annuity international options do have some investments in Russia.
  • Securian acknowledged Feb. 17 that the Russian conflict with Ukraine was a geopolitical wildcard.

Some life insurers may have a good view of the effects of the Russia-Ukraine war on world financial markets.

Some offer variable annuities with separate account options that link crediting rates to the performance of Russian issuers’ stocks and bonds.

Other life insurers have asset management arms with exposure to Russia-linked investments through mutual fund that focus on investments in Russia, Eastern Europe or emerging markets.

Insurance agents and other members of the public can see information about the Russia-linked investments by using the SEC’s Variable Insurance Products filings search page.

What’s There

Voya, for example, has a Voya Russia Fund that had about $94 million, and a 53.75% 1-year return, during the 12-month period that ended Oct. 31, 2021, according to an SEC filing.

The Voya Russia Fund’s top three investments were in Gazprom, an energy company; Sberbank of Russia, a bank; and Yandex, an internet search and services company.

Fidelity, Great-West, Manulife’s John Hancock, Prudential Financial and Securian are examples of some of the insurers with units that mention Russia in filings for the portfolios that support variable annuity, variable life and variable universal life products.

Some of the filers were cautiously optimistic about the risks involved with investing in Russia.

In December 2021, for example, managers of the Voya Russia Fund reported that Russia’s economy was beating market expectations, thanks to rising commodity prices.

“A new COVID-19 related lockdown and slow progress on vaccinations could keep a ceiling on future corporate and consumer demand,” the Voya fund managers said. “Nonetheless, we are gradually becoming more positive on Russia’s ability to sail though the current COVID-19 crisis due to a combination of elevated commodities’ prices and proactive government measures to increase budget revenues.”

Managers at Securian warned, in a filing completed Feb. 17, that “Russia is a geopolitical wildcard.”

“It has amassed a huge military buildup near the Ukrainian border,” the fund managers said. “Given that Russia already annexed Crimea in 2014 and has generally been escalating its rhetoric regarding NATO in Eastern Europe, the risk of Russia attacking Ukraine and, by extension, Western Europe and the U.S. being dragged into a conflict, should not be underestimated.”

What It Means

Even at Voya, Russia-related assets make up a tiny percentage of the company’s international fund assets.

Other insurance-related international and emerging market funds’ mostly have less than 5% of their assets in Russia, and only a modest portion of the assets under management in international funds.

Typical life insurers will be affected more by the effects of geopolitical turmoil on their trillions of dollars of high-grade corporate bonds.

Financial regulators in Europe and the United States have imposed sanctions on large Russian businesses and business owners. It’s possible that those sanctions could affect life insurance sector mergers and acquisitions by affecting the amount of cash flowing through private equity firms.

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A Sberbank branch in Prague. (Photo: Milan Jaros/Bloomberg)