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    About Goldman Sachs Asset Management

    Goldman Sachs Asset Management Reveals Insurers are Cautiously Optimistic about Investment Opportunities


    04/20/16

    Fifth Annual Survey Finds Insurers Believe Low Yields Pose Greatest Risk to Achieving Adequate Returns

    New York/London/Hong Kong/Sydney, April 20, 2016 – Goldman Sachs Asset Management (GSAM) today released the results from its annual survey of nearly 300 CIOs and CFOs at global insurance companies, representing more than $7 trillion in balance sheet assets. The report titled, “Optimism Grows as Expectations Decline,” found that insurers expressed increased optimism for investment opportunities in the next year as a result of asset class dislocations and a more benign macro environment outlook. Despite increased optimism, insurers surveyed generally believe investment returns will be more muted as central bank quantitative easing programs continue.

    “The dominant concern of insurers remains achieving adequate returns in the persistent, low-yield environment,” said Michael Siegel, GSAM’s Global Head of Insurance Asset Management. “However, despite declining investment returns squeezing profitability, insurers generally believe the industry is well-capitalized if not over-capitalized.”

    Americas-based insurers expressed concerns regarding credit quality deterioration, while insurers in Asia Pacific were concerned about equity market volatility and EMEA-based insurers cite regulatory capital as a constraint on investment strategy. Overall, the majority (59%) of insurers surveyed indicated that they intend to maintain current levels of portfolio risk with a modest nod to increasing credit risk and duration risk, with EMEA-based insurers demonstrating a greater risk appetite and insurers in Asia Pacific planning to decrease equity risk and increase portfolio liquidity.  Demand for U.S. investment-grade corporate securities is broad-based globally.

    Additional highlights of this year’s survey include:

    • Market return expectations around rates, equities, and credit continue to worsen. Insurers are most concerned about the impact of a slowdown or recession in the U.S. economy, credit and equity market volatility, and slowing growth in China. Insurers do not anticipate a significant increase in the 10-Year U.S. Treasury yield, and more than 40 percent of insurers believe S&P 500 Index returns will be negative in 2016.
    • For the first time since the annual GSAM survey launched in 2012, insurers expect government and agency debt to be among the highest-returning asset classes — an indication that quantitative easing programs will continue. Insurers plan to increase allocations to U.S. investment-grade corporate debt (24%) and less liquid assets such as private equity (24%), infrastructure debt (24%) and real estate equity (23%) this year. Insurers intend to decrease allocations to emerging market local currency corporate and sovereign debt.
    • A majority of insurers (59%) intend to maintain current levels of risk, with one-fourth looking to increase overall investment risk. A greater percentage of insurers in EMEA plan to increase portfolio risk compared to insurers in other regions, with a preference towards adding more credit risk. Asia Pacific insurers intend to adopt a more risk-off approach by increasing portfolio liquidity and decreasing equity risk.
    • Insurers continue to outsource investments to third-party asset managers. In particular, Asia Pacific insurers indicated a stronger demand for outsourcing more of their portfolios. In general, insurers expect to outsource investments in U.S. investment-grade corporate debt (28%), private equity (27%), high-yield debt (23%), mortgage-backed securities (19%) and hedge funds (19%).

    Methodology
    GSAM Insurance Asset Management partnered with KRC Research, an independent third-party research firm, to conduct the 2016 survey. The global online survey received 276 responses, including 226 CIOs, 42 CFOs and 8 individuals who serve as both CIO and CFO. By region, the survey received 156 responses from the Americas, 62 from EMEA and 58 from Asia Pacific. The global respondent base included Life, Property & Casualty, Multi-Line, Reinsurance, and Health insurers. This study represents insurers with more than a combined $7 trillion in global balance sheet assets.

    GSAM currently oversees over $190 billion in insurance assets as of December 31, 2015. GSAM’s insurance capabilities include partial to full outsourcing solutions involving fixed-income strategies, alternative investments and equities. The group offers a suite of advisory services including asset liability management, strategic asset allocation, capital-efficient investment strategies and risk management.

    For more information, please visit: http://www.goldmansachs.com/gsam/worldwide/insurance/

    Goldman Sachs Asset Management is the asset management arm of The Goldman Sachs Group, Inc. (NYSE: GS), which oversees $1.29 trillion in assets under supervision as of March 31, 2016.  Goldman Sachs Asset Management has been providing discretionary investment advisory services since 1988 and has investment professionals in major financial centers around the world. The company offers investment strategies across a broad range of asset classes to institutional and individual clients globally. Founded in 1869, Goldman Sachs is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals.