Western & Southern Financial Group's Equity Growth Strategy Explored

Western & Southern Financial Group is capitalizing on its robust capital position to achieve significant equity growth in its investment strategy. Known as one of the most well-capitalized life insurers, the company has allocated a larger portion of its portfolio to equities compared to industry peers, focusing on total return.

Brendan White, Co-Chief Investment Officer of Western & Southern and Fort Washington Investment Advisors, noted that their capital surplus supports a strategic boost in equity allocation, driving growth. "Because of our surplus of capital, we have a higher allocation to equity than our peers, which has driven our growth," White explained in an interview with Institutional Investor.

The investment team, led by White and Co-CIO Christopher Shipley, manages a $65 billion portfolio for Western & Southern, with the OCIO division handling around $30 billion in external assets. While fixed income accounts for 83% of their portfolio, approximately $5 billion, representing 6%, is invested in equities—surpassing the industry norm of 2% for life insurers. Furthermore, private equity investments comprise 2% of the portfolio, totaling roughly $1.5 billion.

The firm's strategic equity investment approach has resulted in substantial returns, with a 12% portfolio growth rate over the past decade, outpacing the average net 10-year yield of 3.44% in the life and health insurance sector. This robust performance recently led AM Best to upgrade its outlook on Western & Southern subsidiaries to positive, highlighting their solid balance sheet and strong enterprise risk management.

The industry trend reveals a growing interest among insurers in diversifying assets beyond traditional fixed income investments, with increased attention towards private assets. As OCIOs seek to broaden their client bases, insurers like Western & Southern exemplify the potential benefits of a diversified investment approach within the insurance landscape.