US L/A insurers increase bond purchases over mortgages and alternative assets

Written by Adam Cadle

17/04/2025

US life/annuity (L/A) insurers allocated a higher share of new investment purchases toward bonds over mortgages and alternative assets through the first three quarters of 2024, when compared with the prior two years, according to AM Best.

According to the report, the quality of bond portfolios within the segment remains high and largely investment grade. More than 30% of newly purchased bonds in the third quarter of 2024 were rated NAIC-2, up nearly twofold from 16% in 2020, and marking the highest level in five years. The influx of NAIC-2 rated debentures has played a role by creating a supply side issue.

“This increased supply of bond issues has lowered prices, making them more appealing to insurance companies looking for value in a competitive market and more attractive on a relative basis,” said Jacob Conner, associate analyst, AM Best.

Mortgage loans accounted for 11% of all investment acquisitions as of third quarter 2024, with new acquisitions being fuelled largely by residential properties.

Insurers have been adjusting to downward pressure facing office properties since the COVID-pandemic, limiting new purchases and shrinking the allocation to this property type, favouring other property types with more attractive characteristics.

Around 15% of alternative assets acquired by L/A companies through the third quarter of 2024 were private equity investments, significantly lower than its year-end 2023 allocation of over 45%.

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