The life insurance industry’s assets aregrowing, but not as fast as in previous years. Insurers have beenfrustrated by low interest rates but remain wary of chasing yieldsthrough the types of investments favored in the run up to the 2008financial meltdown, according to an annual industry analysis byConning, an investment management company focused on the insuranceindustry.


Highlights from the report:

  • Investable assets for the industry increased 4 percent in 2014,to $3.4 trillion.

  • $2.8 trillion, or 82 percent, of assets were in bonds.

  • Gross investment income increased 5.2 percent, to $199.7billion.

  • Gross book yields decreased 8 basis points, to 4.98 percent ofinvestable assets.

  • The largest insurers only account for 10 percent of the industrycount, but hold 85 percent of investable assets.

  • The smallest insurers, who account for 40 percent of the totalcount, hold 0.1 percent of assets.

“The quest for yield has been the key focus for thelife industry investment portfolio foryears now,” said Mary Pat Campbell, Vice President, InsuranceResearch at Conning. “In response to the continued pressures of thelow interest rate environment, insurers have been adjustingallocations in the investment portfolio to provide the much-neededextra yield.”


Insurers, the report explained, are seeking to reduce thevolatility of their portfolios by shifting away from stocks tobonds. Unfortunately for the investors, stubbornly low interestrates have made it hard to make money in the bondsmarket.


But while the report notes that the Fed still hadn’t increasedthe federal funds rate, which has remained near zero since 2008,recent news suggests that it is likely to raise rates soon inresponse to improving jobs numbers.


In an appearance before a Congressional committee last week, FedChairwoman Janet Yellen said that she was considering raising theshort-term interest rate as soon as next month, as long as theeconomy continues to improve. Less optimistic monetary experts havehighlighted recent economic woes overseas, particularly in China,in suggesting the Fed should approach rate hikes withcaution.

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