Conning Research: Life Insurers’ Gross Investment Returns Fall Sharply

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Improved Investment Expenses Help to Offset Decline

(Hartford, CT) September 7, 2004 – Life insurers suffered a steep decline in gross investment returns over the last five years, led by falling interest rates, corporate defaults, and rating agency downgrades, according to a new study by Conning Research & Consulting, Inc.

Gross investment income returns for 1999 to 2003 dropped by 1.3 percentage points from 8.1% in 1999 to 6.8% in 2003. However, the investment expense ratio somewhat cushioned the blow, improving each year during the study period.

“As interest rates declined, insurers took a significant hit in overall return,” said Jim Smith, analyst at Conning Research. “However, they sensibly looked for less expensive investment classes and made the appropriate shifts to help offset the decline in returns.”

The Conning Research study, “Investment Profile of the Life Insurance Industry-2004 Edition” examines statutory investment information over a five-year period for the industry and compares investment returns and sector strategies within each of the key investment classes.

“Our study looks at six distinct classes of insurers within the life industry,” said Stephan Christiansen, director of research at Conning. “While we found ranges of investment approaches and results, all have experienced declining returns, and should expect that trend to continue. As a consequence, the desire to maintain return levels and lower capital charges will continue to drive sector strategies over the coming year. In this environment, larger companies may achieve some economies of scale in expenses relating to certain asset classes, and may develop competitive advantages in net investment yields.”

“Investment Profile of the Life Insurance Industry-2004 Edition” is available for purchase from Conning Research & Consulting, Inc., by calling (888) 707-1177 or by visiting the company’s Web site at

About Conning Research & Consulting, Inc.

Conning name has represented excellence in independent insurance industry research for more than 90 years. As a result of its wealth of experience and intimate knowledge of the insurance industry, Conning understands industry challenges and opportunities and can provide in-depth insights and analyses. Conning provides both public and proprietary research as well as consulting services to the financial services industry. Conning has offices in New York and Hartford.