In This List

ETFs in Insurance General Accounts – 2020

ETFs en las Inversiones de Compañías de Seguros – 2020

ETFs nos Investimentos das Companhias de Seguros - 2020

The S&P Composite 1500®: An Efficient Measure of the U.S. Equity Market

A Survey of Mexican Insurance Investment Officers

ETFs in Insurance General Accounts – 2020

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Raghu Ramachandran

Head of Insurance Asset Channel

INTRODUCTION

In our first report in 2015, we used historical trends to project that insurance companies would double their use of exchange-traded funds (ETFs) in five years. Now five years later, usage of ETFs in insurance general accounts has indeed doubled since 2015. In the one-year period ending Dec. 31, 2019, insurance companies increased their ETF assets under management (AUM) by 16% to reach USD 31.2 billion. We saw companies increase their use of Equity and Fixed Income ETFs. While the overall use of ETFs increased, we did observe some parts of the industry that had been active in using ETFs pull away. Although the use of Fixed Income ETFs increased, the use of Systematic Valuation (SV) declined.

OVERVIEW

As of year-end 2019, U.S. insurance companies had USD 31.2 billion invested in ETFs. This represents a tiny fraction of the USD 4.4 trillion of ETF AUM and an even smaller portion of the USD 6.7 trillion in admitted assets of U.S. insurance companies. Exhibit 1 shows the use of ETFs by U.S. insurance companies over the past 16 years.

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ETFs en las Inversiones de Compañías de Seguros – 2020

INTRODUCCIÓN

En nuestro primer informe de 2015, utilizamos tendencias históricas para proyectar que las compañías de seguros duplicarían su uso de ETFs en los cinco años siguientes. Cinco años más tarde, el uso de estos fondos en las inversiones de aseguradoras efectivamente se duplicó desde 2015. En el período de un año finalizado el 31 de diciembre de 2019, las compañías de seguros aumentaron sus activos en administración (AUM) de ETFs en 16%, llegando a US$ 31.2 mil millones. Observamos un alza en el uso de ETFs de renta variable y renta fija. Si bien el uso general de ETFs aumentó, algunas partes de la industria que habían sido activas en el uso de estos fondos se alejaron. Aunque el uso de ETFs de renta fija se incrementó, el uso de valuación sistemática (VS) disminuyó.

RESUMEN

Al cierre de 2019, las compañías de seguros de EE. UU. habían invertido US$ 31.2 mil millones en ETFs. Esto representa una pequeña fracción de los US$ 4.4 billones en AUM de ETFs y una parte todavía más pequeña de los US$ 6.7 billones en activos admitidos de las aseguradoras de EE. UU. La figura 1 muestra el uso de ETFs por parte de compañías de seguros estadounidenses durante los últimos dieciséis años.

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ETFs nos Investimentos das Companhias de Seguros - 2020

INTRODUÇÃO

No nosso primeiro relatório em 2015, utilizamos tendências históricas para projetar que, em cinco anos, as seguradoras duplicariam o seu uso de ETFs. Hoje, cinco anos depois, o uso de ETFs nos investimentos das companhias de seguros é, de fato, o dobro comparado com 2015. No período de um ano encerrado em 31 de dezembro de 2019, as seguradoras aumentaram 16% os ativos sob administração (AUM) em ETFs até atingir US$ 31,2 bilhões. As companhias incrementaram o uso de ETFs de renda variável e renda fixa. Embora o uso geral de ETFs tenha subido, algumas partes da indústria que tinham sido ativas no uso destes instrumentos se afastaram. Mesmo que o uso de ETFs de renda fixa tenha crescido, o uso da valorização sistemática (VS) caiu.

RESUMO

No final de 2019, as seguradoras americanas tinham US$ 31,2 bilhões investidos em ETFs. Esta cifra representa uma pequena fração dos US$ 4,4 trilhões de AUM em ETFs e uma porção ainda menor dos US$ 6,7 trilhões em ativos líquidos destas companhias. O quadro 1 mostra o uso de ETFs por parte das seguradoras americanas durante os últimos 16 anos.

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The S&P Composite 1500®: An Efficient Measure of the U.S. Equity Market

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Hamish Preston

Associate Director, U.S. Equity Indices

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Phillip Brzenk

Senior Director, Strategy Indices

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Aye Soe

Managing Director, Global Head of Product Management

EXECUTIVE SUMMARY

Launched in 1995, the S&P Composite 1500 (hereafter the "S&P 1500") serves as a benchmark indicator for U.S. equity market performance, aggregating price movements of S&P 500®, S&P MidCap 400®, and S&P SmallCap 600.

The S&P 1500 also increasingly serves as a basis for constructing portfolios designed to deliver a "market" return at lower cost than those active managers who offer to beat it. We shall examine the S&P 1500 from both perspectives, as well as examining its merits in comparison to popular alternatives. In particular, we observe that:

  • The sizeable representation of U.S. companies means tracking U.S. equity market performance may be relevant to investors, globally;
  • The S&P 1500 has outperformed the S&P 500, historically;
  • Incorporating smaller companies in a U.S. market benchmark provides a more holistic view of the U.S. economy (see Exhibit 7); and
  • Compared with other U.S. equity market indices, the S&P 1500 avoids relatively illiquid, lower priced, and lower quality stocks (see Exhibit 1).

MEASURING THE U.S. EQUITY MARKET

U.S. companies represented an average of 49.47% of the S&P Global BMI’s capitalization at each year-end between 1995 and 2019, more than five times the average weight of second-place Japan (9.39%). Given that U.S. companies also accounted for over 50% of the market capitalization in most global industries at the end of 2019, many investors may need to turn to the U.S. in order to obtain certain exposures.

The S&P 1500 is designed for investors seeking to replicate the performance of the U.S. equity market, or benchmark against a representative universe of tradable stocks. The S&P 1500 combines three widely followed indices—the S&P 500, S&P MidCap 400, and S&P SmallCap 600—in proportion to their free-float market capitalizations. Hence, the S&P 1500 uses the same inclusion criteria as its three component indices.

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A Survey of Mexican Insurance Investment Officers

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Raghu Ramachandran

Head of Insurance Asset Channel

In February 2020, S&P Dow Jones Indices and the Association of Mexican Insurance Companies (AMIS) conducted our second annual survey of insurance investment officers in Mexico about the state of the local insurance industry.

The objective of the annual survey is to better understand how Mexican insurers invest and allocate their excess capital and how they view issues such as regulation, passive strategies, and the implementation of environmental, social, and governance (ESG) investment criteria. With each annual survey, it is our aim to reflect the current state of the insurance investment landscape from the perspective of the investment decisionmakers.

We administered the survey between Feb. 4 and Feb. 28, 2020, prior to the aggressive spread of COVID-19 in North America and the declaration of the virus as a global pandemic by the World Health Organization. As such, the coronavirus and its potential implications for the financial markets may not have been as top of mind for respondents as they likely would be today. Answers to questions regarding expected returns, adjustments in allocations, concerns, and economic projections represent the respondents' perspectives pre-crisis, under comparatively "normal" market conditions. This report summarizes respondents' perspectives on the following themes:

  • Investments and asset allocation, with a focus on excess capital;
  • Sensitivity to and potential impacts of regulation;
  • The implementation of ESG criteria within the investment process;
  • Indexing and the use of passive strategies and instruments; and
  • 2020 economic indicators.

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