which will last a long time. anyone have an opinion if this is a plus for hig? low interest rates for a long time is a plus if you are borrowing all the time and if you hold stuff that is paying a good rate, that will be worth more. but is that going to help hig? we need something positive. thanks/aloha
It's all about the yield curve, which has been steepening lately. This is very good for banks tend to borrow in the short-term and lend for the long term. Insurance tend to benefit from anything good for banks.
To the best of my knowledge, HIG has 70% of its investment portfolio in highly rated corporate debt.
More important I think is that HIG has been lately doing retail lending alongside banks, looking for a higher return.
Low interest rates aren't good for insurance companies. Two examples: Annunities. Enough said. Second HIG holds a lot of money in reserve to pay claims and low interest rates suppresses the amount of money they earn on these reserves. It also makes the underwriting piece more important, as there is less overall dollars in play.
HIG has nothing to do with commodities and equities are a small part of company investments. Most investments are in bonds which are now providing very low yields. Also the high level of cash and short term investments yield virtually nothing. The company must maintain its historically disciplined underwriting if it is going to make decent profits, as investments generally are not going to help much.