Insurers and CMOs


Insurers are always searching for yield, but don’t want that yield to come at the expense of higher uncertainty.


We take risk on with our underwriting so when we get to the investment side, we tend to take less risk.


Bob Hughes, Gray Insurance Company


CMOs are an opportunity worth considering in a low-interest-rate investing environment, Prime Institutional’s Ray Gilliam said. “They’re not having to go out on that curve and pick up a lot more risk to pick up additional yield.”


Gray Insurance’s Bob Hughes said his organization has a mix of long- and short-tail lines, meaning they have to maintain an investment portfolio that recognizes mixed durations.


“Until we got into the CMO program, U.S. Treasuries exclusively is what we were using,” Hughes said. “We tend to keep an amount equal to our loss reserve in U.S. Treasuries; that’s our security to make sure that they’re there when the losses finally come in. The CMOs have been a complement to our U.S. Treasuries. It’s a piece of the whole investment puzzle.”


North Star Mutual’s Hoff said his organization maintains a conservative investment philosophy. “Preservation of capital is our primary concern,” Hoff said. Besides the CMOs, we have U.S. Treasuries, government agencies, corporates and also some municipal bonds. We also have a portfolio of high quality stocks, so we have a pretty well-rounded investment portfolio.”


Copyright © 2011 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11