Issues & Answers Special Advertising Section
September 2019

Issues & Answers: Mutual Admiration

John Simone, managing director and head of insurance solutions for Voya, said every insurance company, whether it’s a stock or a mutual company, needs to be concerned with the rate environment. “Especially now that the Fed has come out to be more doveish than originally thought, dealing with the headwinds of low rates is a concern to any insurance company,” said Simone. The following are excerpts of an interview.

John Simone

John Simone
Managing Director and Head of Insurance Solutions
Voya

“One of the key areas where we've been very successful is introducing ideas to a mutual insurance company that they may not historically have had access to.”


At a Glance

  • 40-year history of investment management.
  • $213 billion in assets under management.
  • Customer solutions provider for insurance companies.




How do large mutuals differ from large stock companies?

There’s really not a tremendous amount of difference, and that’s really because of the gating factors associated with the regulatory environment capital. However, large mutuals can be much more focused on total return in their portfolios. They may actually have somewhat larger alternative portfolios, where a stock company might be a little bit more focused on accounting volatility versus a mutual that’s really focused on statutory accounting. Those tend to be the major differences, but overall, I don’t think you’re going to see a huge delta between a stock and mutual company.

What are the challenges large mutuals face these days?

The same challenges that any large or small insurance company, stock or mutual. It’s dealing with a very low rate environment where everything seems to be pretty richly priced. Everybody wants to make sure that they have enough dry powder should there be a dislocation in the market that they’re able to take advantage of it. That’s why the large mutuals continue to leverage alternatives that have a low correlation to rates and credit spreads so that they can take advantage of market dislocation in the fixed income world should that happen.

Do you find it’s important to understand the culture of a mutual?

That’s critical, because if you go in being tone deaf to a mutual’s culture, you’re not going to be very successful. One of the benefits we have at Voya is that our starting place with any insurance company is looking at the current risks that they’re taking and looking at ways that we can reshape their underlying portfolio without increasing risk. Anyone can go in to an insurance company’s portfolio and just say, “Hey, let’s increase leverage. Let’s add additional risk.” Of course, you’re going to have higher returns for that increased risk.

What’s Voya’s approach to managing assets for mutuals?

It’s pretty analogous to what we do for stock companies, however, if we have a mutual that is much more total return focused, then we will look to manage assets in a total return way versus book yield, which is oftentimes the predominant method of managing insurance company assets.

 

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