Insurance outsourced general accounts
Insurance spinning into gold
Firms garnering big business from outsourced general accounts
Posted: July 23, 2007, 6:01 AM EST
Insurance has never looked so sexy to money managers.
As the pool of defined benefit pension assets declines, more investment management firms are growing their business by managing assets outsourced by insurers. Indeed, general account insurance assets managed by the 50 largest firms in the business increased 28% — 18.1% on a market-adjusted basis — in less than two years.
For a list of the largest managers of insurance assets, plus profiles of the 30 largest managers, click here.
As of March 31, the 50 largest managers of general account insurance assets (excluding any corporate affiliates) ran a total of $801 billion, according to a survey conducted by Pensions & Investments. And that figure could easily grow to $2 trillion over the next several years, insurance experts predict.
The 50 largest managers of outsourced insurance money ran $626 billion at the end of June 2005, the last time P&I conducted a survey of insurance asset managers.
Insurance companies have relied on external money managers to run chunks of their general account assets for years, typically in plain-vanilla bond strategies.
But the needs of both investment managers and insurance companies now are converging: money managers want and need to gather assets to grow their businesses; insurance companies want and need more sophisticated and better-performing investment strategies, and so are moving away from in-house asset management.
“It’s a new period of insurance asset management … a new phase of accelerated outsourcing,” said Jack Corroon, managing director and head of global client business development at Conning Asset Management, Hartford, Conn., which runs $66 billion in non-affiliated insurance assets.
“There’s no question about the growth opportunities,” said David Holmes, partner at strategic consulting firm Eager, Davis and Holmes LLC, Louisville, Ky.
But Mr. Holmes predicts that much of the soon-to-be-outsourced assets will likely go to the managers that have already established themselves as players in the insurance space.
“It’s not enough to just have investment products, you have to understand the insurance business,” said Sunny Patpatia, founder of financial services consulting firm Patpatia & Associates Inc., Berkeley, Calif. “And you also have to have scale too.”
Large players
So far, the market for externally managed industry assets has been dominated by a handful of large players. The 10 largest managers of insurance assets run a combined $626 billion in non-affiliated general account assets — roughly 80% of the total outsourced assets managed by the 50 largest players.
Several have won megamandates from insurers during the past 18 months, further increasing the top 10’s hold.
Most notably, BlackRock Inc., New York, grabbed a $10.6 billion assignment in May from Safeco Corp., Seattle, in one of the largest single outsourcing assignments to date in the industry. Safeco also hired BlackRock to handle its investment management account services.
This assignment will further boost New York-based BlackRock’s insurance assets under management from the $113 billion it reported at the end of March, continuing a significant growth spurt for the firm. Since June 2005, BlackRock has increased its insurance assets by roughly 50%.
“The vast majority of our relationships have started out with small assignments that have gradually grown as insurers have looked for broader services and investment strategies,” said Michael Huebsch, managing director and head of BlackRock’s financial institutions group.
BlackRock offers not only specialty and alternative fixed-income strategies, but also asset allocation, accounting, technology and risk-modeling services. “Insurance clients are looking to reduce the number of vendors they use, not increase them,” Mr. Huebsch noted.
In another big hiring earlier this year, Deutsche Asset Management, New York, was hired by Converium, a Zug, Switzerland-based reinsurer, to manage roughly $4 billion in assets previously run in-house. In addition to providing Converium with asset management, DeAM is advising the reinsurer on another $1 billion in assets the company continues to run in-house.
This assignment illustrates the importance of being able to package asset management with other services, but also points to the significant potential to tap into global insurance companies, said Robert Goodman, managing director and co-head of DeAM’s insurance asset management business.
DeAM executives see so much potential with insurance companies worldwide that they estimate the firm — already the largest insurance asset manager with $150 billion in assets — could eventually grow the business to as large as $1 trillion in insurance assets under management.
More competition
Globally, estimates of the size of the insurance industry’s manageable assets range from $12 trillion to $15 trillion. With only a fraction outsourced to date, and the growth in the size of mandates, many expect the competition among asset managers to significantly increase in the near future.
“There are a lot of assets to be had and there are also more options for insurance companies as a result,” said James Hirschmann III, chief executive officer of Western Asset Management Co., Pasadena, Calif., which manages $38.8 billion in non-affiliated general account assets. “Theoretically, it’s great for insurance companies because (the competition) should increase the quality of the research and the service they are getting from money managers.”
Among the largest insurance asset managers, Western Asset, Wellington Management Co., General Re-New England Asset Management, State Street Global Advisors, General Electric Asset Management, Goldman Sachs Asset Management and AAM Insurance Investment Management each significantly increased insurance assets since June 2005.
“Not only are these insurance assignments larger than traditional pension assignments, but they’re also much stickier,” said Mr. Patpatia, who estimated an investment manager’s relationship with an insurance client can last two to three times as long as a relationship with a defined benefit plan. “For investment managers, you have to go where the growth is, and right now it’s with insurance companies.”
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Charts and data
Top managers of non-affiliated general account insurance assets
Posted: July 23, 2007, 6:01 AM EST
| Top managers of insurance assets | ||
| Insurance asset managers ranked by non-affiliated general account assets, in U.S. millions, as of March 31 | ||
| Rank | Manager | Assets |
| Total | $800,954 | |
| * includes assets of entities formerly affiliated with GEAM, including Genworth Financial | ||
Top managers of non-affiliated insurance assets
Posted: July 23, 2007, 6:01 AM EST
| Top insurance managers | ||
| Insurance asset managers, ranked by total non-affiliated assets, in U.S. millions, as of March 31 | ||
| Rank | Manager | Assets |
| Total | $1,209,624 | |
| * includes assets of entities formerly affiliated with GEAM, including Genworth Financial | ||
Profiles of the largest insurance asset managers
Posted: July 23, 2007, 6:01 AM EST
Profiles of the largest insurance asset managers
AAM
AIG Global Investment Group
Babson Capital Management
BlackRock
Capital Guardian Trust Co.
Conning Asset Management
Delaware Investments
Deutsche Asset Management
Dwight Asset Management Co.
Evergreen Investments
Fort Washington Investment Advisors Inc.
GE Asset Management Inc.
General Re-New England Asset Management
Goldman Sachs Asset Management
Hartford Investment Management Co.
Lehman Brothers
Loomis, Sayles & Co. LP
Lord Abbett & Co. LLC
MFC Global Investment Management
MFS Investment Management
JPMorgan Asset Management
Northern Trust Global Investments
Pacific Investment Management Co.
Principal Global Investors
Prudential Financial Inc.
Putnam Investments
State Street Global Advisors
Sun Capital Advisers LLC
Wellington Management Co. LLP
Western Asset Management Co.
| AAM | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $15,465 |
| General account | $14,518 |
| Subadvised | $947 |
| Non-affiliated | $15,466 |
| Non-affiliated general account assets | $15,465 |
| Fixed income | 100% |
| AIG Global Investment Group | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $475,828 |
| General account | $445,736 |
| Subadvised | $24,412 |
| Other | $5,680 |
| Non-affiliated | $5,790 |
| Affiliated | $470,038 |
| Non-affiliated general account assets | $5,680 |
| Fixed income | 88% |
| Equities | 9% |
| Alternatives | 3% |
| The firm’s insurance/reinsurance asset management clients include: Nan Shan; AIG-DBG; ALICO; U.S. Life; and AIRCO. | |
| Babson Capital Management | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $69,989 |
| General account | $59,036 |
| Subadvised | $10,953 |
| Non-affiliated | $931 |
| Affiliated | $58,105 |
| Non-affiliated general account assets | $931 |
| Alternatives | 100% |
| Babson Capital Management manages assets for parent Massachusetts Mutual Life Insurance Co. | |
| BlackRock | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $167,004 |
| General account | $114,501 |
| Subadvised | $52,503 |
| Non-affiliated | $165,097 |
| Affiliated | $1,907 |
| Non-affiliated general account assets | $112,939 |
| Fixed income | 41% |
| Equities | 35% |
| Alternatives | 3% |
| Other | 21% |
| BlackRock manages assets for parent Merrill Lynch & Co. | |
| Capital Guardian Trust Co. | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $16,474 |
| General account | $2,958 |
| Subadvised | $13,516 |
| Non-affiliated | $14,977 |
| Non-affiliated general account assets | $2,958 |
| Equities | 100% |
| Conning Asset Management | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $69,953 |
| General account | $69,953 |
| Non-affiliated | $66,254 |
| Affiliated | $3,699 |
| Non-affiliated general account assets | $66,254 |
| Fixed income | 98% |
| Equities | 2% |
| Conning Asset Management manages assets for parent Swiss Re. | |
| Delaware Investments | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $70,083 |
| General account | $70,083 |
| Non-affiliated | $3,885 |
| Affiliated | $66,198 |
| Non-affiliated general account assets | $3,885 |
| Fixed income | 96% |
| Alternatives | 4% |
| Delaware Investments manages assets for parent Lincoln Financial Group. | |
| The firm’s insurance/reinsurance asset management clients include: Swiss Re; Scottish Re; Transamerica; Sons of Norway; and Great West Life. | |
| Deutsche Asset Management | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $165,028 |
| General account | $149,108 |
| Subadvised | $4,945 |
| Other | $10,975 |
| Non-affiliated | $149,108 |
| Non-affiliated general account assets | $149,108 |
| Fixed income | 88% |
| Equities | 8% |
| Other | 4% |
| Dwight Asset Management Co. |
|
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $21,951 |
| General account | $20,606 |
| Subadvised | $1,345 |
| Non-affiliated | $2,565 |
| Affiliated | $19,386 |
| Non-affiliated general account assets | $1,220 |
| Fixed income | 100% |
| Dwight Asset Management Co. manages assets for parent Old Mutual Financial Network. | |
| Evergreen Investments | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $21,429 |
| General account | $20,441 |
| Subadvised | $988 |
| Non-affiliated | $21,042 |
| Affiliated | $387 |
| Non-affiliated general account assets | $20,054 |
| Fixed income | 95% |
| Equities | 5% |
| Fort Washington Investment Advisors Inc. | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $23,312 |
| General account | $23,312 |
| Non-affiliated | $85 |
| Affiliated | $23,227 |
| Non-affiliated general account assets | $85 |
| Fixed income | 92% |
| Alternatives | 8% |
| Fort Washington Investment Advisors Inc. manages assets for parent or affiliates Columbus Life Insurance Co.; Western & Southern Life Insurance Co.; Western & Southern Life Assurance Co.; Integrity and National Integrity Cos.; Lafayette Life Insurance Co. | |
| The firm’s insurance/reinsurance asset management clients include: Midland Co.; United of Omaha/Mutual of Omaha. | |
| GE Asset Management Inc. | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $97,773 |
| General account | $97,773 |
| Non-affiliated | $71,840 |
| Affiliated | $25,933 |
| Non-affiliated general account assets | $71,840 |
| Fixed income | 91% |
| Equities | 1% |
| Other | 8% |
| General Re-New England Asset Management | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $76,065 |
| General account | $75,131 |
| Subadvised | $934 |
| Non-affiliated | $54,348 |
| Affiliated | $21,717 |
| Non-affiliated general account assets | $53,414 |
| Fixed income | 99% |
| Equities | 1% |
| General Re-New England Asset Management manages assets for parent General Re Corp. | |
| Goldman Sachs Asset Management | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $40,776 |
| General account | $14,095 |
| Subadvised | $26,681 |
| Non-affiliated | $40,776 |
| Non-affiliated general account assets | $14,095 |
| Fixed income | 87% |
| Equities | 4% |
| Alternatives | 9% |
| Hartford Investment Management Co. | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $90,173 |
| General account | $90,173 |
| Non-affiliated | $1,412 |
| Affiliated | $88,761 |
| Non-affiliated general account assets | $1,412 |
| Fixed income | 100% |
| Hartford Investment Management Co. manages assets for parent or affiliates Hartford Accident & Indemnity Co.; Hartford Fire Insurance Co.; Hartford Life Insurance Co.; Hartford Property & Casualty Co.; Hartford Financial Services Group Inc. Co. | |
| The firm’s insurance/reinsurance asset management clients include: IFG Cos.; Michigan Municipal Risk Authority; Michigan SET SEG Workers Compensation Fund; Chicago Hospital Risk Pool; and Physicians Mutual Health Co. | |
| Lehman Brothers | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $25,708 |
| General account | $15,305 |
| Subadvised | $7,003 |
| Other | $3,400 |
| Non-affiliated | $25,708 |
| Non-affiliated general account assets | $15,305 |
| Fixed income | 21% |
| Equities | 38% |
| Alternatives | 41% |
| Loomis, Sayles & Co. LP | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $21,115 |
| General account | $13,547 |
| Subadvised | $3,423 |
| Other | $4,145 |
| Loomis, Sayles manages assets for parent IXIS Asset Management US Group LP. | |
| Lord Abbett & Co. LLC | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $18,097 |
| General account | $765 |
| Subadvised | $9,959 |
| Other | $7,373 |
| Non-affiliated | $18,097 |
| Non-affiliated general account assets | $765 |
| Fixed income | 82% |
| Equities | 18% |
| The firm’s insurance/reinsurance asset management clients include: MetLife; AXA Equitable Life Insurance Co.; Hartford Life Insurance Co.; AIG SunAmerica Retirement Markets; and Protective Life Insurance Co. | |
| MFC Global Investment Management | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $181,821 |
| General account | $138,015 |
| Subadvised | $43,205 |
| Other | $601 |
| Non-affiliated | $923 |
| Affiliated | $180,898 |
| Non-affiliated general account assets | $851 |
| Fixed income | 100% |
| MFC Global Investment Management manages assets for parent Manulife Financial. | |
| The firm’s insurance/reinsurance asset management clients include: London Life; Penncorp Life; BF&M Life Insurance Co.; 5 Star Life Insurance Co.; Reliance Insurance Co. | |
| MFS Investment Management | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $41,767 |
| General account | $22,771 |
| Subadvised | $18,995 |
| Non-affiliated | $31,759 |
| Affiliated | $10,008 |
| Non-affiliated general account assets | $12,763 |
| Fixed income | 81% |
| Equities | 19% |
| MFS Investment Management manages assets for parent Sun Life. | |
| The firm’s insurance/reinsurance asset management clients include: Hartford Life & Annuity Insurance; Pacific Life Insurance Co.; MetLife; USAA Investment Management; and ING/Golden American. | |
| JPMorgan Asset Management | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $53,324 |
| General account | $30,158 |
| Subadvised | $23,166 |
| Non-affiliated | $52,583 |
| Affiliated | $741 |
| Non-affiliated general account assets | $29,417 |
| Fixed income | 85% |
| Equities | 12% |
| Alternatives | 3% |
| JPMorgan Asset Management manages assets for affiliate Chase Insurance. | |
| Northern Trust Global Investments | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $29,275 |
| General account | $19,024 |
| Other | $10,251 |
| Non-affiliated | $29,275 |
| Non-affiliated general account assets | $15,223 |
| Fixed income | 19% |
| Equities | 56% |
| Other | 25% |
| The firm’s insurance/reinsurance asset management clients include: AEGIS Insurance Services Inc.; Bituminous Insurance Co.; Blue Cross Blue Shield of Florida; Nuclear Electric Insurance Ltd.; and Texas Property & Casualty Insurance Guarantee. | |
| Pacific Investment Management Co. | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $220,276 |
| General account | $182,201 |
| Subadvised | $31,683 |
| Other | $6,392 |
| Non-affiliated | $52,007 |
| Affiliated | $168,269 |
| Non-affiliated general account assets | $13,932 |
| Fixed income | 98% |
| Equities | 1% |
| Alternatives | 1% |
| PIMCO manages assets for parent Allianz SE. | |
| Principal Global Investors | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $70,106 |
| General account | $59,228 |
| Subadvised | $10,878 |
| Non-affiliated | $10,878 |
| Affiliated | $59,228 |
| Non-affiliated general account assets | $10,878 |
| Fixed income | 85% |
| Equities | 3% |
| Alternatives | 12% |
| Principal Global Investors manages assets for parent or affiliates Principal Financial Group; Edge Asset Management; Post Advisory Group; Spectrum Asset Management. | |
| The firm’s insurance/reinsurance asset management clients include: Nippon Life Insurance; RGA Reinsurance; Fort Dearborn Life Insurance; Knights of Columbus; Delta Dental of Iowa. | |
| Prudential Financial Inc. | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $235,762 |
| General account | $202,209 |
| Subadvised | $3,315 |
| Other | $30,238 |
| Non-affiliated | $29,720 |
| Affiliated | $206,042 |
| Non-affiliated general account assets | $5,683 |
| Fixed income | 96% |
| Equities | 3% |
| Alternatives | 1% |
| Putnam Investments | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $23,112 |
| General account | $3,432 |
| Subadvised | $2,052 |
| Other | $17,628 |
| Non-affiliated | $21,746 |
| Affiliated | $1,366 |
| Non-affiliated general account assets | $2,033 |
| Fixed income | 93% |
| Equities | 7% |
| Putnam Investments manages assets for parent or affiliates: Nippon Life Insurance; Marsh & McLennan Cos.; and Great West. | |
| The firm’s insurance/reinsurance asset management clients include: Hartford; Allstate; AIG SunAmerica/VALIC; Riversource; and HDI Group. | |
| State Street Global Advisors | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $31,786 |
| General account | $29,733 |
| Subadvised | $2,053 |
| Non-affiliated | $31,786 |
| Non-affiliated general account assets | $29,733 |
| Fixed income | 39% |
| Equities | 53% |
| Other | 8% |
| Sun Capital Advisers LLC | |
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $44,500 |
| General account | $43,313 |
| Other | $1,187 |
| Non-affiliated | $132 |
| Affiliated | $44,368 |
| Non-affiliated general account assets | $132 |
| Fixed income | 78% |
| Equities | 22% |
| Wellington Management Co. LLP |
|
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $162,645 |
| General account | $54,432 |
| Subadvised | $108,213 |
| Non-affiliated | $162,645 |
| Non-affiliated general account assets | $54,432 |
| Fixed income | 89% |
| Equities | 10% |
| Alternatives | 1% |
| Western Asset Management Co. |
|
| U.S. millions | |
| Worldwide insurance/reinsurance assets | $40,709 |
| General account | $38,802 |
| Subadvised | $1,907 |
| Non-affiliated | $40,709 |
| Non-affiliated general account assets | $38,802 |
| Fixed income | 100% |