U.S. High Yield for Insurance Companies

In a nutshell

• High yield serves an important role in income generation for insurance portfolios, providing diversified income streams versus traditional core fixed income.
• Insurers’ general aversion to default losses has resulted in higher quality biases, which can affect portfolio risk and return as well as industry exposure. Historically, changes in spreads have been, on average, more timely indicators of credit deterioration than agency downgrades.
• When combining high yield with other corporation investments, industry beta and overlap should be an important consideration for portfolio construction.
• For investors looking to be more tactical, measuring market distress and implied default rates or risk premia have been a useful time for capturing beta rallies.  
   

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