Due to soaring interest in pension risk transfers from plan sponsors as well as the significant increase in investment outsourcing to third-party money managers by insurers, Pensions & Investments collected insurance data for the first time since 2014. Technological changes and the decades long low-interest-rate environment have led to increasing complexity in asset management and return pressures, leading to insurance companies seeking external help for all or part of their investments.
Along with insurance asset manager survey data, Pensions & Investments aims to paint a clear picture of the insurance industry landscape. Forty-three insurance asset managers participated in the P&I survey and posted worldwide insurance/reinsurance assets under management totaling $6.39 trillion as of Dec 31, 2020. The 10 largest managers in total represented approximately 69.33% of the worldwide insurance AUM. Pacific Investment Management Co. ranked first among the largest insurance asset managers with $636.2 billion in insurance AUM, followed by Amundi, PGIM, MetLife Investment Management, Goldman Sachs, BlackRock, Schroders, DWS, BNP Paribas Asset Management and J.P. Morgan Asset Management. Seventeen insurance managers filled out both 2014 and 2020 surveys; their worldwide AUM totaled $2.96 trillion, up 29.1% from $2.29 trillion in 2014. Goldman Sachs grew its assets significantly to $416.5 billion, a 160.3% increase from $160.02 billion in 2014.
BlackRock, Goldman Sachs, Conning, J.P. Morgan, Lazard Asset Management, Loomis, Sayles & Co., MFS Investment Management, PIMCO and Wellington Management participated in all P&I surveys since 2005. Their total AUM increased 80.59% to $2.08 trillion in 2020 but shrank from $2.81 trillion from 2014, due to PIMCO’s large AUM outflow. PIMCO’s worldwide insurance AUM was up 46.54% from $443.1 billion in 2005, but its asset level shrank significantly from $1.25 trillion in 2014, dipping to $636.21 billion in 2020. In 2014, when Bill Gross abruptly left PIMCO to join Janus Investments, within a year the firm’s total AUM suffered a 15% decline. Goldman Sachs’s AUM increased 1,376% from $28.2 billion in 2005. Goldman Sachs acquired the variable life insurance and variable annuity business of Allmerica Financial Corp. with roughly $11 billion AUM in 2005.
Based on the available data provided by insurance managers in the 2020 survey, 14 firms had 100% of their insurance assets managed in general accounts. Some 79.5% of worldwide insurance AUM came from general accounts and 11.2% from subadvised accounts. The other 9.3% was mostly from separate account, commingled fund, variable life and annuity products. Among the 10 largest insurance managers, 80.12% of worldwide assets were managed in general accounts and 10.06% in subadvised accounts.
Out of the insurance managers that filled out all surveys since 2005, Goldman Sachs’s non-affiliated insurance companies AUM grew 1,376% to $416.5 billion from $28.2 billion in 2005. In the same category, BlackRock’s assets rose to $352.7 billion, up 247% from $101.5 billion in 2005. It used to manage assets exclusively for non-affiliated firms, but now 12% of its assets were managed for affiliated/parent companies in 2020. Conning’s non-affiliated insurance companies AUM increased 56.41% to $78.5 billion. In 2005, 98.23% of Conning’s assets were from non-affiliated insurance companies but by 2020, 41.72% of assets were managed for affiliated/parent companies. J.P. Morgan’s non-affiliated insurance companies AUM grew by 1,195.77% to $244.6 billion from $18.9 billion in 2005. In 2005, 28.8% of its AUM came from affiliated/parent companies; now J.P. Morgan managed assets exclusively for non-affiliated insurance companies.
With the increasing need from insurers to optimize investment strategies to produce the best risk-adjusted income in the most cost-effective way, 39 insurance managers reported their non-affiliated general account AUM rose to $2.3 trillion as of Dec 31, 2020. BlackRock ranked first with $351.1 billion in non-affiliated GA AUM, followed by Goldman Sachs, DWS Group, J.P. Morgan, Wellington Management, PIMCO, BNP Paribas Asset Management, PGIM, Conning and New England Asset Management.
Based on the detailed non-affiliated general account data submitted by 31 insurance managers, 29% of assets were managed for full life insurers, 28% for property/casualty insurers, 16% for life/health insurers and 9% for reinsurers. The remaining 18% of assets came from multiline insurers, general insurance, corporate cash, car insurance, professional liability and workers' compensation.
Thirty-six insurance managers provided asset class level allocation data on non-affiliated general account assets in P&I’s 2020 survey. Fixed income accounted for 79.94% of AUM, followed by 6.8% in equities, 5.91% in alternatives and the rest was invested in multiasset, LDI and cash. The data indicates that the industry will mostly likely still be fixed income-centric as 13 insurance managers allocated more than 90% of total assets to fixed income in 2020. Western Asset Management, Payden & Rygel and Guggenheim Investments exclusively manage fixed-income allocations. Securian Asset Management, Voya Investment Management and PIMCO weighted their portfolios heavily to fixed income, with a 98% allocation. Seventeen insurance managers that filled out both 2014 and 2020 surveys raised their average fixed-income allocation to 80%, from 74.07% and maintained equity exposure of 18%-19% and reduced alternatives allocation to 1%-2%.
Only Sage Advisory Services had 5% of assets managed in ETFs. Fifteen insurance managers achieved an 80%+ ESG integration in their investment decision-making process. Ares Management, Conning, Guggenheim Investments, Lazard Asset Management, Mondrian Investment Partners, PIMCO, Pathway Capital Management, Payden & Rygel and Federated Hermes claimed that 100% of their non-affiliated general account assets were managed under ESG principles.
With most employees working remotely during the pandemic and more investment management being outsourced, cyberattack risks keep rising. P&I’s survey indicates that J.P. Morgan employs 1,331 cybersecurity professional, followed by 160 hired by MetLife Investment Management and 97 hired by Prologis.
Based on the data provided by 24 insurance managers, 269 new non-affiliated clients were gained in 2020, and new non-affiliated GA assets acquired as of Dec 31 totaled $83.5 billion. Out of 30 insurance managers, the average asset size of non-affiliated clients is $470 million. PGIM had the largest average non-affiliated GA asset size of $1.59 billion, followed by PPM America of $1.33 billion and DWS Group of $1.11 billion.
A full report will be published later in 2021.