Monday 1400 Capital Markets Update...• Equity Markets’ Volatility and U.S. Insurance Industry...

© 2016 National Association of Insurance Commissioners


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Capital Markets UpdateCapital Markets Update

Edward L. Toy

Director – NAIC Capital Markets Bureau


This presentation is pre-qualified for NAIC Designation Renewal Credits (DRCs). If you currently hold an NAIC APIR, PIR, or SPIR designation and are pursuing continuing education credit to maintain it, you may be awarded credits for your participation. To receive credit, you must be in attendance for the duration of the presentation.

Attention APIR, PIR, or SPIR Designees…



Learning Objectives

At the end of this presentation, you will be able to:

• Discuss performance of investment markets over the last 12 months that impact insurers

• Discuss areas of volatility in 2016 that have impacted insurance company investments

• Discuss changes in US insurer investment practices from 2014 to 2015

• Consider areas of regulatory concern





Treasury Yield Curve



Credit Spreads


Equity Volatility



Oil Prices (West Texas)


Euro versus US Dollar



Commercial Real Estate Values


Residential Real Estate Values



US Insurance Industry Assets

Total Life Property Fraternal Health Title 2014 ChangeCorporate 2,165,405,816 1,695,605,238 347,939,329 68,469,216 50,419,564 2,972,469 2,096,369,929 69,035,887 Non-Agency Structured 524,766,812 411,954,220 95,990,326 6,911,090 9,895,639 15,537 524,406,990 359,822 Government 1,340,426,321 672,417,897 582,769,385 25,613,125 57,457,576 2,168,338 1,323,574,752 16,851,569 Hybrid 22,802,758 19,440,059 2,664,692 339,076 337,122 21,809 25,311,565 (2,508,807)

Preferred 23,717,802 9,082,075 13,743,014 288,270 299,824 304,619 22,914,852 802,950 Common 304,835,393 30,032,490 253,403,640 3,236,559 17,304,105 858,599 320,767,270 (15,931,877)

- Commercial Mortgage 387,168,666 364,727,449 11,867,064 10,535,605 9,844 28,704 359,680,552 27,488,114 Mezzanine Loans 8,517,799 8,237,510 270,806 9,483 - - 6,428,644 2,089,155 Real Estate 21,677,717 18,284,834 2,977,712 123,556 241,990 49,625 18,552,706 3,125,011 Schedule BA 134,152,025 85,884,418 42,683,771 1,331,003 4,180,034 72,799 137,573,969 (3,421,944) Affiliated 617,501,905 231,326,061 357,248,287 2,949,110 24,609,369 1,369,078 610,896,889 6,605,016

Total 5,550,973,014 3,546,992,251 1,711,558,026 119,806,093 164,755,067 7,861,577 5,446,478,118 104,494,896

Invested Assets - Year end 2015 (as of 04/15/16)


Invested Assets Breakdown

Total Life Property Fraternal Health Title 2014 ChangeCorporate 39.0% 47.8% 20.3% 57.2% 30.6% 37.8% 38.5% 3.3%Non-Agency Structured 9.5% 11.6% 5.6% 5.8% 6.0% 0.2% 9.6% 0.1%Government 24.1% 19.0% 34.0% 21.4% 34.9% 27.6% 24.3% 1.3%Hybrid 0.4% 0.5% 0.2% 0.3% 0.2% 0.3% 0.5% -9.9%Preferred 0.4% 0.3% 0.8% 0.2% 0.2% 3.9% 0.4% 3.5%Common 5.5% 0.8% 14.8% 2.7% 10.5% 10.9% 5.9% -5.0%Commercial Mortgage 7.0% 10.3% 0.7% 8.8% 0.0% 0.4% 6.6% 7.6%Mezzanine Loans 0.2% 0.2% 0.0% 0.0% 0.0% 0.0% 0.1% 32.5%Real Estate 0.4% 0.5% 0.2% 0.1% 0.1% 0.6% 0.3% 16.8%Schedule BA 2.4% 2.4% 2.5% 1.1% 2.5% 0.9% 2.5% -2.5%Affiliated 11.1% 6.5% 20.9% 2.5% 14.9% 17.4% 11.2% 1.1%

Invested Assets - Year end 2015



Changes Over Time

2015 2014 2013 2012 2011 2010Corporate 43.9% 43.4% 43.1% 39.0% 37.7% 38.4%Structured 10.6% 10.8% 10.6% 18.0% 19.1% 17.8%Government 27.2% 27.4% 28.2% 27.4% 28.2% 28.8%Hybrid 0.5% 0.5% 0.6% 0.7% 0.9% 1.1%

Preferred 0.5% 0.5% 0.4% 0.4% 0.4% 0.6%Common 6.2% 6.6% 6.5% 4.9% 4.4% 4.3%

Commercial Mortgage 7.8% 7.4% 7.3% 6.7% 6.5% 6.4%Mezzanine Loans 0.2% 0.1% 0.1% 0.1% 0.1% 0.1%Real Estate 0.4% 0.4% 0.4% 0.4% 0.4% 0.3%Schedule BA 2.7% 2.8% 2.8% 2.5% 2.3% 2.3%

Bonds 82.2% 82.1% 82.5% 85.1% 85.9% 86.0%CRE 8.5% 8.0% 7.8% 7.1% 6.9% 6.8% * Note definition of Structured was changed in 2013 for this data to exclude agency-backed.

0.4%

-0.1%1.9%

1.4%0.1%0.1%

Change in weights5.5%-7.1%-1.6%-0.6%


Capital Markets Special Reports



• Recent Economic Trends and Volatility in Major Foreign Currencies (1/13/2015)

• Implications of Currency Policy Change by Swiss National Bank (1/29/2015)

• Moody's Lowering City of Chicago Debt Rating to 'Junk' Status Has Small Impact on Overall Insurance Industry Holdings (5/15/2015)

• Greece and Puerto Rico Turmoil – Minimal Impact on U.S. Insurer Investments (6/29/2015)

• Equity Markets’ Volatility and U.S. Insurance Industry Exposure (9/2/2015)

• Market Update: A Turbulent Start to 2016 (01/19/2016)• Complications for U.S. Insurers Caused by Flatter Yield Curve

(02/10/2016)• Negative Interest Rates and Market Implications (02/16/2016)• Year-End 2015 U.S. Insurer Exposure to Private Equity Funds

Decreases;Hedge Funds Increases (04/04/2016)


Insurance Equities versus the Market



Insurance Equities versus Financials

Monday 1400 Capital Markets Update...• Equity Markets’ Volatility and U.S. Insurance Industry...

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