A Shield From Rougher Weather


Most insurers are long-term investors and can’t afford to be buffeted by daily swings in the state of the economy.


It’s probably been the best of times for these investments. It’s been a good yield enhancer and also a good balance against some of our other investments.


Joe Hoff, North Star Mutual Insurance Company


“The nature of the investment is that there are payoffs on the mortgages that underline the security, so there is cash that’s returned on it that has to be reinvested on a monthly basis,” Gray Insurance’s Bob Hughes said. “This gives you an opportunity to manage your cash.”


In fact, extra cash generated during harder markets could be added to investment funds, while soft markets may see a greater need for directing cash toward business operations, speakers said.


“This has become a very difficult overall investment environment but the CMOs have really helped to supplement smaller underwriting profits and to help offset underwriting losses,” North Star Mutual’s Joe Hoff said. “The current low interest rate environment which has been negative for most investments has been a real plus for the CMOs.”


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.


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