LOUISVILLE, Ky. -- U.S. insurance companies are courting better investment performance for their general account assets by increased use of external money managers, according to annual survey data from Mercer Manager Advisory Services.
The percentage of large insurance companies with more than $5 billion in assets that use external managers increased dramatically, to 58% this year, up from 31% in 1996, according to the Mercer survey data. The percentage of all insurers using external managers increased to 66% this year from 53% in 1996.
Insurance assets managed externally rose 14% to $374 billion this year, compared with $300 billion in 1998.
The data collected by Mercer, formerly Eager Manager Advisory Services, suggest insurance companies are not settling for anything but the best, as terminations are up. Insurers also are getting more sophisticated about style allocations and are splitting up existing mandates.
One-quarter of insurers used outside managers for active fixed-income accounts in 1998; that percentage rose to 29% in 2000. The use of active equity external managers rose to 22% in 2000, from 19% in 1998 and the use of passive equity external managers rose to 11% this year from 4% two years earlier.
The greatest growth in the use of specialized managers by insurance companies was for core, growth and value equity managers, which jumped to 21% this year and was non-existent in 1998. Hires of small-cap to midcap equity managers also are increasing, with 5% of insurers hiring outside managers for these asset classes this year, up from zero two years ago.
Mercer surveyed 215 companies, representing 39% of the non-captive life insurance/casualty insurance companies based in the United States.