Mid-Year Update: Industry Perspectives Life, Health, and P&C

At this past Insurer Investment Forum, Mark Yu of New England Asset Management provided an overview of how have insurers’ portfolios shifted based on their line of business (and operational needs). As a follow-up to this presentation, we spoke with Mark again to provide an update of what has changed for insurers now that we're in the second half of 2026.

Mark Yu | Head of Enterprise Capital Strategy | New England Asset Management
mark.yu@neamgroup.com | Learn More >>

SAA: What was the defining investment theme for insurers in 2025? Have these themes changed much in 2026?

NEAM: Elevated yields continued to support fixed income portfolios. Across sectors, insurers benefited from a higher yield environment, while also improving portfolio credit quality and selectively repositioning toward spread sectors. The impact on overall investment income, however, varied significantly by sector, reflecting differences in asset allocation and income sources. Looking ahead, the key dynamic remains insurers' ability to reinvest portfolio cash flows at yields that remain well above the levels available just a few years ago.

SAA: Did higher interest rates translate into stronger investment income for insurers?

NEAM: Not uniformly. Life insurers benefited most directly, with net investment income continuing to rise alongside decade-high book yields. In contrast, P&C and Health insurers experienced lower net investment income despite higher yields, although for different reasons. P&C results were pressured by lower equity dividend income, while Health insurers experienced lower income from cash, short-term investments, and Schedule BA assets.

SAA: How are insurer portfolios evolving in response to today's market environment? Are they evolving differently across Life, Health, or P&C?

NEAM: Across sectors, insurers have remained focused on high-quality fixed income while selectively increasing exposure to spread sectors to enhance yield. However, the shifts have differed by sector. Life insurers increased allocations to private placements and asset-backed securities while reducing corporate bond exposure. P&C insurers continued reallocating from tax-exempt municipal bonds toward structured securities. Health insurers also increased exposure to structured securities, with Agency RMBS becoming the second-largest fixed income sector in 2025. Overall, insurers have sought to improve portfolio income while maintaining prudent credit quality and risk profiles.

SAA: How has insurer appetite for risk assets evolved in recent years?

NEAM: Risk-asset trends, as measured by exposure to equities, below-investment-grade bonds, and Schedule BA investments, differed by sector. P&C risk-asset exposure continued to decline from its 2021 peak, although excluding the impact of a large outlier insurer, overall positioning remained broadly stable. Health insurers saw risk-asset allocations rebound in 2025, driven by higher allocations to equities and Schedule BA investments. Life insurers maintained a relatively stable risk profile, with Schedule BA assets remaining the primary source of risk-asset exposure and only limited allocations to equities.

SAA: What do these trends suggest for insurer investment strategy going forward? Do you see any distinct trends forming across Life, Health, or P&C insurers?

NEAM: The 2025 results suggest that insurers have improved credit quality while benefiting from a higher-yield environment. P&C and Health insurers improved credit quality while maintaining relatively stable duration, whereas Life insurers improved credit quality and modestly extended duration. More broadly, the current environment allows insurers to enhance portfolio income without materially increasing credit risk. Going forward, successful investment strategies will likely focus on balancing yield enhancement with liability characteristics, capital considerations, risk appetite, and overall enterprise objectives.

Strategic Asset Alliance, New England Asset Management. The information contained herein has been obtained from S&P Capital IQ Pro, but the accuracy of information cannot be guaranteed.