Insurance Talks is an interview series where insurance industry thinkers share their thoughts and perspectives on a variety of market trends and themes impacting indexing.
Robert Amodeo is Head of Municipals at Western Asset Management Company, LLC and has more than 30 years of investment experience. Since 2005, Robert has been part of Western Asset’s municipal bond investment team and is the sector head of that group.
S&P DJI: Tell us a bit about your role at Western Asset Management Company and how you serve the insurance space?
Robert: At Western Asset, I lead a team of investment professionals including portfolio managers, research analysts, and quantitative analysts with an average of 27 years of experience in the muni market. Our investment philosophy at the firm is centered around a long-term, fundamental value approach and this is woven into the portfolios we manage for insurance clients. Our firm manages over USD 85 billion of insurance company mandates for U.S. and international companies across business lines, including life, health, property/casualty, and reinsurance. Our muni portfolios reflect the unique objectives and constraints ranging from full discretion, total return focused clients to book yield focused clients that are constrained by capital, regulatory, and accounting considerations.
S&P DJI: Fixed income comprises a significant portion of insurers’ portfolios.What trends have you seen in terms of asset allocation within this sector in recent years?
Robert: Two trends we have been seeing in munis is the search for yield and the growing allocation in taxable bonds. Book yields have declined since the global financial crisis and many of our clients partner with us to generate yield for their general account assets via yield curve management, sector allocation, and security selection. We look to add value to their portfolios by capitalizing on opportunities in undervalued securities, out of favor industries, trading inefficiencies, and rising stars.Since December 2011, the aggregate market value and number of issues in the S&P Taxable Municipal Bond Index have grown 39% and 42%, respectively. A combination of factors including tax reform, relative value, and good capital treatment have also spurred interest from U.S. and international insurance companies in taxable munis.