Large companies that do financially complex things and offer a solid dividend yield, rather than high growth, are hardly the stuff of which investors’ dreams are made. However, the life insurance industry has managed to make it through the premium renewal season without any adverse news, and companies this year are likely to generate capital well in excess of their statutory requirements.
Life insurers can make a return from investment capital, which in some ways is easier than the business of tying up capital in writing policies, even if it makes some nervous about potential losses. Nowadays, the assets themselves are increasingly being deployed in private markets: Deloitte Consulting reports that more life insurance companies are deploying capital in the booming private credit market as an alternative to investing in volatile equities.
Investors should expect that trend to continue as life insurers look for stable (or, at least, less regularly marked to market) sources of income that will finance their push into the pensions transfer market. Taking on companies' pension liabilities has been big business for the sector in recent years, and there is little sign of that slowing down.