A.M. BestTV: European Insurers Sharpen Focus on Investment Growth, Says A.M. Best Financial Analyst

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OLDWICK - JUNE 20, 2018 02:06 PM (EDT)
In this ^A.M.BestTV episode, Thomas Bateman, financial analyst, A.M. Best, said an examination of 500 Northern and Western European insurers’ assets showed a slight shift toward higher returns from fixed-income assets, with many maintaining a relatively strong level of capitalization. Click on http://www.ambest.com/v.asp?v=europeaneconomictrends618 to view the entire program.

“The largest 500 Northern and Western European insurance companies have a combined asset base of around €8 trillion,” said Bateman. “A.M. Best has witnessed the shift of approximately 2%-3% of that moving to quoted equity from fixed income investments. There has also been an increase in alternative or other investment classes. Investment managers are looking for yields on that invested asset base.”

Bateman said that there is a two-fold reason for this shift in asset allocation.

“First, there are rising asset valuations that contribute to higher allocation to equity. The other point is a small shift between those asset classes as insurers and pension funds, as both groups search for ways to improve their performance and maintain funding levels. One slight offsetting factor is higher bond prices, which have been on a strong upward trend.”

He said he also has seen that, “Pension funds or insurance companies, particularly with longer tail liabilities, have really struggled as result of the low discount factors that they have been using. Corporate earnings have also benefited from cheap financing rates and relatively low-level inflation.”

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