Monetary policy is on course to being normalized after the unprecedented actions of the Fed, both on rates and the balance sheet, in the post-Covid era. Meanwhile, equity valuations are approaching the first quartile of their long-term range, driven by productivity gains and technological developments such as Generative AI.  In this unique environment, Investment Grade Convertible Bonds are a timely investment and carry several significant advantages for the insurance industry.

Due to the unprecedented monetary policy by the Federal Reserve in recent years, interest rates are at extremely low levels throughout the yield curve. This has created extraordinary challenges for the insurance industry, which relies heavily on high quality fixed income investments.

Benefits of Convertibles for Insurance Investors: Capital Efficiency– Convertibles are treated as bonds for Risk Based Capital charges. They hold up far better than equities during volatile markets. Diversification– Convertibles have low correlation to Bonds which is a benefit to Bond heavy investments. Interest Rate Sensitivity– Convertibles perform relatively well when interest rates rise. Asymmetry– Due to the convex nature of the return profile, convertibles capture most of the upside of the movement of the underlying equity and much less of the downside movement. Risk Management– Portfolio Risk Exposure can be fine-tuned to meet specified goals. Investment Grade– We