The US insurance industry reported an investment exposure to debt issued by the Treasury Department of $303.87 billion at year-end 2022, according to a review of regulatory documents.
The recent debt ceiling standoff on Capitol Hill has brought new attention to an asset class that has been synonymous with safety and predictability. It also led at least two rating agencies to place the US government's credit rating on negative watch.
President Joe Biden struck a tentative budget deal with House Speaker Kevin McCarthy (R-Calif.) on May 28 that would extend the debt ceiling and place a cap on baseline spending during the next two years. The Fiscal Responsibility Act passed its first hurdle when the House Rules Committee approved the bill, which is expected to be voted on by the full House on May 31. The bill would then need to pass the Senate before June 5, the date at which the Treasury estimates that the federal government would not have enough money to meet its debt obligations.
The nation's property and casualty insurers reported the largest holdings in US Treasury debt with an aggregate carrying value of $148.49 billion at year-end 2022, compared to a total $2.2 trillion of unaffiliated investable assets.
Life insurers' total cash and unaffiliated investable assets on Dec. 31, 2022, exceeded $5 trillion, with almost $131 billion of that sum in US Treasurys.
Health insurers have reported about $25 billion in various debt instruments issued by the Treasury.
Progressive has largest exposure
The Progressive Corp. reported a total carrying value of $24.14 billion in US Treasurys at the end of 2022, the largest among domestic insurers. While the insurer's total investment may be large, a relatively small amount matures before the end of 2023. Over the last six months of 2023, Progressive has $618.6 million worth of Treasurys slated to mature, with none in June.
The US units of Fairfax Financial Holdings Limited had the most exposure to US Treasurys that mature in June, with a reported carrying value of $415.9 million as of Dec. 31, 2022. A single Treasury note that matures June 30 makes up the bulk of such maturities, with an aggregated reported value of $351.2 million for the insurer. An additional $1.02 billion of Treasurys mature before the end of 2023.
In total, US property and casualty insurers reported that $1.64 billion of their US Treasurys holdings mature in June.
– Download a template that includes sensitivity analysis to approximate 2021 risked-based capital for P&C, life and health insurers.
– Read the interactive 2023 US Insurance Investment Market Report
MetLife leads life pack
About 7% of MetLife, Inc.'s unaffiliated investable assets are in US Treasurys, equating to an aggregate carrying value of $19.67 billion as of Dec. 31, 2022, but only $2 million is set mature in June.
Equitable Holdings Inc. has the largest exposure to Treasurys scheduled to mature in June among all US life insurers. It has an $86.2 million investment in a Treasury note that matures June 30 and has invested in an additional $40.7 million of debt that will mature over the course of the rest of the year.
Life insurers reported an aggregate of $149.2 million in Treasurys with June maturity dates, with another $2.77 billion maturing before the close of 2023.
This analysis was limited to US property and casualty, life and health insurers with direct investment exposure to debt instruments issued by the US Treasury Department. If the insurer sold or bought additional debt instruments issued by the US Treasury since the end of 2022 or has material insurance operations domiciled outside the US, the values reported may not accurately reflect the total exposure of the company.
