NEAM Insights

Higher education in the U.S. is in a crisis of sorts. The sector is contending with a litany of pressures that are forcing institutions to evolve in an increasingly bifurcated marketplace. This directly impacts insurer portfolios, as higher education represents approximately 9% of U.S. insurance company municipal bond holdings. Despite the recent Federal policy headwinds, the most competitive institutions continue to demonstrate resilience while others face mounting financial and enrollment pressures. Read More

Airport bonds comprise ~4% of outstanding muni debt1 and have long been a source of incremental yield in insurance company portfolios. While economically sensitive, the sector has proven resilient through prior disruptions including 9/11 and the 2008 financial crisis. Further, a rated municipal airport credit has never defaulted. The Coronavirus pandemic, however, has proven to be as great a challenge to the modern U.S. commercial aviation industry and its infrastructure as any disruption on record. By way of background, municipal airport bonds are usually secured by general operating revenues including airline fees, concessions and rents, parking fees, passenger facilities charges, etc. Airports are typically self-supporting entities that do not rely on general fund revenues of their host cities/metropolitan areas. Read More

Potential tax changes appear aggressive for both individuals and corporations, yet tax-exempt municipal bond valuations are unlikely to change substantially relative to taxable alternatives. Market segmentation, specifically with respect to individual investors, should help keep municipal valuations in check. Regardless, corporate tax cuts would result in less favorable tax-adjusted muni yields for institutional investors though still competitive relative to taxable bond alternatives. Read More