It is commonly understood that investment profiles, strategies and practices differ among U.S. insurance companies. Life insurance companies invest differently from Property & Casualty (“P&C) and Health insurance companies. These differences reflect different needs in asset-liability management and meeting liquidity requirements. In addition to differences across insurer types, however, there are significant differences in investment portfolios when comparing different sized insurers within each of those insurer types. Smaller companies rely on different investment practices than larger companies. There are many reasons for this. Substantively, smaller insurers tend to have less flexibility and are less able to absorb the market volatility of more complex, less liquid asset types. As always, the specific needs of individual insurers should be considered on their own. Smaller institutions also may have less access to certain markets. This dynamic has changed somewhat with the increasing reliance on unaffiliated investment managers, but that transition is the subject of a different discussion. This Market Briefing provides some basic analysis into the differences in portfolios by grouping insurance companies for each insurer type into common
size categories.