Bank loans were one of the fastest-growing asset types in 2022 for U.S. insurers, increasing by 21% to $117 billion in book/adjusted carrying value (BACV) from $97.2 billion in 2021.
Despite the double-digit growth, bank loans were under 2% of U.S. insurers’ total cash and invested assets at year-end 2022, and about 75% were acquired in market transactions; the remaining 25% were issued by the reporting entities.
Large life companies, or those with more than $10 billion in assets under management, accounted for almost 80% of U.S. insurers’ bank loan exposure, up from 74% in 2021; the top 10 insurance companies accounted for 60% of U.S. insurers’ total bank loan exposure at year-end 2022, up from 54% in 2021.
There was continued improvement in credit quality for U.S. insurer bank loans, evidenced in part by a decrease in those carrying NAIC 4 Designations—i.e., implying a B credit rating—to 26% of total bank loans in 2022 from 33% in 2021, and countered by an increase in bank loans carrying NAIC 1 Designations to 24% in 2022 from 18% in 2021.
Total U.S. leveraged bank loan volume was about $1.7 trillion in 2022, representing a 2% increase from 2021.
The U.S. insurance industry’s reported BACV of $522.8 billion in other long-term invested assets on Schedule BA represented an increase of 14.8% at year-end 2021 compared to year-end 2020 (see Table 1 and Table 2). Schedule BA assets have experienced strong double-digit growth in recent years, with 2021’s 15% increase in exposure following YOY growth of 13% and 10% in 2020 and 2019, respectively. Total Schedule BA exposure as of year-end 2021 represented 6.5% of the industry’s total cash and invested assets, an increase from 6.1% as of year-end 2020 and 5% as of year-end 2012.
Like previous years, hedge fund, private equity, and real estate investments represented most of the industry’s Schedule BA exposure. Together, they accounted for 75% of total exposure at year-end 2021 compared to 70% at year-end 2020. Exposure to private equity investments experienced significant growth, increasing by 34% YOY to $173 billion as of year-end 2021. Private equity’s share of total Schedule BA exposure rose to 33% from 28% at year-end 2020, surpassing hedge fund investments to become the largest component of the industry’s exposure.
Author(s): Michele Wong and Jean-Baptiste Carelus
Publication Date: 3 June 2022
Publication Site: NAIC Capital Markets Special Report