U.S. life insurers continued to make corporate bonds their main investment course in 2021, but they increased asset-backed securities allocations to add some yield spice.
The Capital Markets Bureau, an arm of the National Association of Insurance Commissioners, has published a life insurer portfolio snapshot in its latest annual report on U.S. insurers' cash and invested assets.
The life insurers included in the report increased their total holdings 5.1% between 2020 and 2021, to $5.2 trillion.
What It Means
If you or your retirement planning clients want to know where the big financial services giants put their assets, here's a look at how some of the giants allocate their assets.
How Life Insurers Invest
Life insurers tend to have products and benefits obligations that stay in place for decades, and they invest heavily in high-grade corporate bonds, mortgages and other long-duration assets.
They have some goals in common with ordinary retirement savers, but they have an even longer horizon and can afford to lock cash away for decades.
The Allocation Shifts
Life insurers continued to hold about 69% of their cash and invested assets in bonds, and $105 billion of the $252 billion 2021 increase in life insurer assets flowed into additional corporate bonds.
Life insurers are known for avoiding common stock, but stock market growth increased the value of their stock holdings 15%, to $223 billion.
