NEAM Insights

2020 in Review 2020 proved to be “one of those years.” A global pandemic wreaked havoc around the world and left many lives and livelihoods in its wake. Historic fiscal and monetary policy measures were taken to keep a very dire situation from completely upending the global economy. In the aggregate, the policies were effective and the economic damage was reasonably well contained, despite the massive disruption and heartache caused by COVID-19. Read More

As we enter 2021, there appears to be light at the end of the tunnel. Multiple vaccines have been shown to be highly effective at preventing infection from the COVID-19 virus and various governmental authorities around the world have approved their use and commenced inoculation programs. While the spread of the virus persists at an alarming pace and the death toll from the pandemic continues to rise, there is cause for optimism. Stock markets have rallied strongly on the heels of the vaccine news as investors have begun to anticipate a post pandemic world. At this point, it appears appropriate to consider the “end” and look toward a future with a marginalized COVID-19 virus or at least with the virus in a manageable state. Read More

As we enter our ninth month of the COVID-19 pandemic, the negative effects of the coronavirus on commercial real estate are becoming evident. One of the most visible indicators has been the elevated CMBS delinquency rate which reached a record level in June 2020. Though that number has started to decline over the last several months, the rate of loans in special servicing remains at recent peak levels. Performance, however, has varied significantly across property types, and the timing of COVID-19 presents a unique challenge to the market as it coincides with several structural shifts taking place. While the pandemic has the potential to accelerate these trends, there is a high level of uncertainty as to what extent commercial real estate will be affected longer-term. 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

The COVID-19 pandemic has created a seismic shift not only in the way that business is conducted, but also in how organizations are run. As companies and their employees strive to maintain their health and safety in the face of the outbreak, many companies have embraced working from home, greatly accelerating a trend that has emerged since the start of the new millennium. While the increased prevalence of working from home will have beneficial or limited impacts for some industries, others will struggle to navigate through a world that is changing rapidly, straining business models and requiring companies to adapt faster than ever before. Below, we take a brief look at how various industries may be impacted by the accelerating adoption of work-from-home arrangements. Read More

Executive Summary The U.S. life insurance industry broad sector allocations remained stable, with bonds and mortgage loans combined representing 85% of the allocation. Allocations to alternative (Schedule BA) assets reached a new high in 2019, but are predominately owned by large organizations. Read More

A Few Observations as We Head to the Polls Elections seem to have gotten more difficult to predict with any true conviction and there is reason to believe that the 2020 presidential election will be a contentious, drawn out affair. In fact, it is widely speculated that it may be a repeat of Bush vs. Gore in 2000, only much, much nastier. The average of national polls has Biden ahead by 8+ percentage points, a gap which narrowed a bit over the summer months. Interestingly, betting odds, which have favored Biden to varying degrees since June, turned significantly in his favor after the first presidential debate (See Charts 1 and 2). Read More

European banks have been one of the weakest performing sectors of the equity market over recent years. We look at the sector from a credit perspective and show how a potentially stronger European Union (EU) post COVID-19, with greater levels of European fiscal integration, could positively impact this important asset class. Read More

The far-reaching Macron-Merkel European Union (EU) recovery plan gained considerable attention when it was announced on 18 May 2020 at a video conference in Paris. As heads of state of the EU’s two largest countries and premiers of the EU’s Franco-German twin engine, France’s President Emmanuel Macron and Germany’s Chancellor Angela Merkel were ideally placed to make such a bold proposal. Read More

The backdrop Higher education, which accounts for 6% ($30 billion) of the U.S. insurance industry’s municipal bond holdings,1 is among the capital market sectors acutely impacted by social distancing. While historically a relatively stable and well-performing sector (Chart 1), it was facing its share of longer-term headwinds even before COVID-19. Now, colleges and universities are dealing with a set of circumstances that is wreaking immediate havoc on students and administrators alike. Will the credit profile of U.S. colleges and universities be permanently damaged, or will COVID-19 simply be another mile marker in the evolution of the higher education sector? Read More