Almost One-Fifth of Insurer-Held Private Securities Are Not Rated, But Disclosure is Changing

The insurance industry's appetite for private credit has grown faster than the infrastructure built to monitor it. Private placement bonds at life insurers grew 6.3% in 2024; over ten years, P&C insurers grew investments in private securities by 15%. Private investments reached 38.7% of corporate bond holdings in 2024.

The SVO (security valuation office) maintains a list of "unresolved" filings: securities received but not yet assigned, reviewed, or designated a rating. At year-end 2025, 19.7% of all filings were unresolved. 

Sectors & Insights - FactSet

In the absence of an SVO rating, insurers rely on private letter ratings. These are credit assessments issued confidentially by rating agencies directly to issuers, outside the public rating process, and are used to determine regulatory capital treatment on private placements. Capital treatment directly affects an insurer's risk-based capital ratio.

The NAIC plans to change this. Item 2025-19, effective December 31, 2026, will require insurers to quantify every private placement on their books supported only by private letter ratings, along with security detail such as fair value and total book value. 

For investors, the disclosure will provide an auditable measure of investments across the industry that rest on private letter ratings rather than an SVO designation that has never before been publicly quantifiable. 

Macro Data and Impact on Insurance Earnings

Our Macro Tracker table below lists key economic data and the potential impact on insurance company earnings. The right-hand column identifies the specific potential impacts on company earnings.

Two of three macro data points are positive for insurance earnings. Market performance and employment support earnings growth; inflation remains a headwind, particularly for P&C insurers. 

Market Performance Data: Impacts Investment Income (positive trend)

The S&P 500 has advanced 9.7% YTD and hit a record 7,519 on May 26. The trend supports earnings for life insurers and annuity writers through higher fee income, stronger separate account values, and expanded realized gain opportunities. 

Employment Data (NFP, Unemployment, Claims): Impacts Premiums (positive)

Claims deteriorated modestly. The April Non-Farm Payroll report released May 9 showed an uptick and was the first release to capture labor market reaction to the April 2 implementation of tariffs. The May 23 claims reading came in at 215,000, pushing the 4-week moving average up to 209,000 from 202,500. Despite the changes in payrolls and claims, the April unemployment rate of 4.3% was unchanged in May from April.

Together, unemployment and claims data supports near-term stability in the premium volume of employer-sponsored benefit lines. The relatively low unemployment rate reduces lapse risk for group products such as life and disability insurance.

The May 16 data broke a two-week rise in claims, which took some pressure off of the group product business. The most recent data resumes the increase. Our note on the potential impact a weaker labor market could have on group insurance premiums (Insurance: Contrary to Positive Estimates, Jobs Data Points to Headwinds) and the headwinds that would be faced by companies with large books of group premiums, such as MetLife. 

Inflation Data: Impact on Claims Costs (negative)

Two measurements of inflation reported by the Bureau of Labor Statistics and Bureau of Economic Analysis, headline CPI and core PCE, continued to increase to 3.8% and 3.5%, respectively. Increases in Core PPI signals continued input cost pressure on construction and repair for insurance companies. In addition, inflation is likely to push up the cost of trade services, such as distribution and logistics costs that are embedded in supply chains.

Improvements in loss expenses, attributed to fewer miles driven in the wake of higher gas prices, may face an offset from the inflationary impact of higher material costs and even trade services. In this context, even if claims costs decline it is important that insurers are diligent about accelerating rate filings and tightening terms in affected lines.

Two Sources of Inflation

Tariff-driven (negative): We have written about the negative impact that tariff-driven inflation has on claims costs. Higher costs for auto parts and lumber attributed to tariffs, for example, push up the cost to settle policyholder claims, which drives up loss ratios and drives down earnings.

Energy-driven (potential positive): We have also written that the most recent source of inflation (higher fuel costs) may actually lower claim costs (Gas Prices, Benefit Ratios, and Inflation) for companies focused on writing auto insurance. We made the case that a sustained increase in the price of gasoline may change driving habits, such as increases in work from home or carpooling, and reduce miles driven. Preliminary adjustments to loss ratio and expense ratio estimates are beginning to reflect this dynamic. (Two Weeks Can Make a Difference for Auto Insurers)

Examples: Macro Trends and Impact on Insurance Earnings

The objective of this section is to connect macro data highlighted in this report with companies and specific line items that may be prone to macro pressure and could impact earnings.

Shown below is the earnings model for Prudential Financial. Our report highlights that a deterioration in the employment data could impact Prudential’s group business. The group life section of the InSync model is shown below. Highlighted are two specific line items that could be negatively impacted by a deteriorating labor market: earned premiums and persistency ratio.

There has been a deteriorating trend over the last four quarters. While year-over-year growth remains positive, the quarter-over-quarter trend has slowed from 10.3% to 2.8%. Also, the persistency rate over the last four quarters has declined almost a full percentage point from 97.0% to 96.1%. Similar to the earned premium trend, while year-over-year trend shows an increase the trend has slowed in the most recent quarters.

Prudential: Employment / Group Premiums 

Source: InSync One-Stop Fundamental Data and Models Platform - InSync Analytics

AUM Through the Cycle

The table directly below presents AUM roll forward data for PRU, EQH, and HIG from 2Q21 through 1Q26, individual company net change (as a percentage of beginning AUM), and the S&P 500 quarterly price return. The pattern that emerges is both consistent and actionable: AUM balances follow S&P 500 returns. 

Company AUM Roll Forward Detail

Equitable: Company/Security - Assets Under Management - EQH-US - FactSet 

 Hartford: Company/Security - Assets Under Management - HIG-US - FactSet 

 Prudential: Company/Security - Assets Under Management - FactSet 

Finding Insurance Insight Reports

Access insurance insight reports from the FactSet Workstation using the Document Search function with this search string: "Insurance Tracker: Event of the Week". 

Insurance Solutions

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