Did Life Insurers Miss Out On Stock Market Profits?

Conning's report "compares apples to oranges," says Jerry Crute, associate director of investment research at the American Council of Life Insurers, Washington.

"The life insurance industry as a whole has $3 trillion in assets, compared to $880 billion for property-casualty," Crute says.

Because life insurers have more money at risk, and they tend to take longer-term risks, investment safety, liquidity and flexibility are bigger concerns for life insurers, he adds.

But Crute points out that life insurers did increase the absolute dollar value of their stock holdings by 20.4% between 1997 and 2000, to $1.4 billion.

David Foy, chief financial officer of Hartford Life, a unit of Hartford Financial Services Inc., Simsbury, Conn., calls the stock market a double-edged sword.

"It's great when markets are going up but not so much when it's going down," Foy says. "In terms of life insurance, your first job is to invest assets so they match your liabilities. Most life insurance liabilities are fixed and predictable in nature, so bond and fixed instruments tend to line up better than equities with the risk."

Hartford Life has about 3% of its investments in "equity type instruments," but little of the equity money is in S&P 500 common stock. Most of the equity investments are in arbitrage portfolios and other hedge instruments, he says.

Reproduced from National Underwriter Life & Health/Financial Services Edition, April 8, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.