S&P Dow Jones Indices recently published a comprehensive study on ETF usage in insurance company general accounts,1 showing Mutual insurance companies used ETFs more than other types of companies. In this report, we analyze the investment trends within the mutual insurance industry and compare them against the remainder of the insurance industry.
The National Association of Insurance Commissioners (NAIC) requires all U.S. insurance companies to file an annual statement with state regulators. This filing includes a detailed holdings list of all securities held by insurance companies. S&P Global Market Intelligence (SPGMI) compiles this data from the NAIC and makes it available in a usable format. We use this database to extract current and historical insurance ETF holdings. In addition, First Bridge, an ETF data and analytics company, provides a list of U.S. ETFs as well as characteristics of each ETF—such as asset class, stock strategy, bond credit quality, etc. We combine First Bridge classification information with the statutory filing data to gain insight into how insurance companies use ETFs.2
As of Dec. 31, 2017, Mutual insurance companies owned USD 7.2 billion of the USD 27.2 billion in ETFs owned by all U.S. insurance companies (see Exhibit 1).
As a proportion of all companies, more Mutual companies have invested in ETFs than non-Mutual companies. Mutuals also invested a higher proportion of their admitted assets in ETFs (see Exhibit 2).
While Mutuals started using ETFs earlier than other insurance companies and have continued to increase their ETF allocation, other companies have begun to invest more significantly in ETFs. In 2017, Mutuals increased their ETF usage by 19% year-over-year, while non-Mutuals increased their usage by 45% year-over-year. Indeed, for all periods—1, 3, 5, and 10 years—non-Mutuals exhibited a higher compound annual growth rate (CAGR) for ETF adoption (see Exhibit 3).