NEAM Insights

EXECUTIVE SUMMARY In 2024, fraternal insurers’ net investment income (as a percentage of invested assets) surpassed that of the broader life insurance industry, driven by stronger returns from alternative investments. However, these alternative investments were largely concentrated among a small number of large fraternal writers. Despite this outperformance at the total portfolio level, the book yield of the fraternal composite’s fixed income portfolio remained below that of the life industry, with the gap widening since interest rates began rising in 2022. Notable differences in the duration and sector allocation within the fraternal composite’s fixed income holdings likely contributed to the lag in book yields, despite comparable credit quality between the two groups. Read More

EXECUTIVE SUMMARY This article examines the enterprise profile of U.S. workers’ compensation (WC) insurers and evaluates their investment performance relative to the broader U.S. property and casualty (P&C) industry. WC insurers tend to carry more invested assets than other P&C insurers and typically exhibit lower premium-to-surplus ratios, reflecting the longer-tailed nature of the WC business. They have adopted a more conservative investment approach, reflected by lower allocations to risk assets, which has resulted in net investment income (%) trailing that of the broader P&C industry over the past decade. Within fixed income portfolios, despite maintaining comparable average credit quality and longer duration relative to the P&C industry, the WC composite generated lower book yields. A focused assessment of sector allocations and duration/quality strategies may reveal opportunities to enhance fixed income portfolio performance. Notably, WC insurers that assumed greater investment risk, particularly larger firms, generally achieved higher book yields, suggesting that selective risk-taking may serve as a lever for improving investment outcomes. Read More

Executive Summary In 2024, the U.S. health insurance industry’s net investment income (%) reached a decade-high of 4.16%, supported by a prolonged high-interest rate environment and increased contributions from cash and short-term investments. The fixed income book yield also continued its upward trajectory, reaching a decade-high following notable improvements during 2022 - 2023. Read More

Executive Summary In this article, we delve into the enterprise profile of U.S. medical professional liability (MPL) insurers and assess their investment performance relative to the broader U.S. property and casualty (P&C) industry. The MPL composite trailed the P&C industry in net investment income (%), partly due to its more conservative asset allocation. Within the fixed income portfolio, despite having similar average credit quality and duration relative to the broader P&C industry, the MPL composite’s book yield was lower, though the gap has narrowed recently. An in-depth comparative analysis of sector allocation and duration/quality strategy may point to opportunities to improve portfolio yields. MPL Insurers that assumed greater investment risk, particularly larger firms, tended to realize higher book yields, suggesting that selective risk-taking could serve as a lever for enhancing investment performance. Read More

Executive Summary In this issue, we examine the enterprise profile and investment characteristics of U.S. fraternal insurers, drawing comparisons with the broader U.S. life insurance industry. Despite being generally smaller in size, fraternal insurers have recorded comparable investment income (expressed as a percentage of invested assets) with the broader industry over the past four years. However, the fraternal composite’s fixed income portfolio book yield has been lower compared to the life industry, and the gap between the two groups has widened since interest rates began to rise in 2022. While the fraternal composite’s fixed income credit quality was in line with the rest of the life industry, duration and sector allocation differences may have been contributing drivers to the lag in book yields. Read More

EXECUTIVE SUMMARY In this issue, we examine the enterprise profile and investment characteristics of U.S. workers’ compensation (WC) insurers, drawing comparisons with the broader U.S. property and casualty (P&C) industry. Our analysis reveals that over the past decade, WC insurers have recorded lower investment income (expressed as a percentage of invested assets) compared to the broader industry. This divergence primarily results from differing appetites for risk assets between the two groups. When analyzing the fixed income portfolios, commonalities emerge between WC insurers and the industry, with both groups displaying comparable durations and credit qualities. Capitalizing on the recent high-interest-rate environment, WC insurers have matched the industry’s performance in fixed income returns, achieving a nearly identical level of book yield by the end of 2022. Read More

EXECUTIVE SUMMARY In this article, we delve into the enterprise profile of U.S. Medical Professional Liability (MPL) insurers and assess their investment performance relative to the broader U.S. property and casualty (P&C) industry. P&C insurers often shape their risk and return profiles around three key pillars: sector allocation, credit quality, and duration. However, our analysis shows that while MPL insurers and the broader industry share similarities in credit quality and duration, there are indications that the overall P&C industry outperforms MPL insurers in both overall net investment income and fixed income book yield. This pattern has persisted over the past decade, signaling a more conservative asset allocation approach adopted by MPL insurers. Within MPL writers, those taking on greater investment risk were generally able to achieve higher book yields, with larger companies more actively taking such risk. Read More