Insurance: Investment Division

I'm under the impression that all major insurance companies have investment divisions in-house, so they can invest their large amounts of capital. My question is, how good would a job in the investment division of an insurance company be for someone straight out of college, if their long-term goal was to be a portfolio manager at a mutual fund, private wealth management firm, hedge fund, or similar buy-side companies? Are insurance companies good places to get your feet wet for investment management? I would definitely be willing to get the CFA and an MBA, so my question is just more about the value of these jobs in terms of work experience.

 
Best Response

I have a friend who works in the investment department, and it definitely depends on what area you work in and how involved that group is in the market. One negative is that, there is a lack of "basic training." When you come in, you are expected to hit the ground running and make an impact. At the same time, that is a plus because you are thrown into the mix and are included in higher level decisions. And most if not all of the MD's come from banks and such.

From a quality of life perspective - the hours are not nearly what you would work at a bank. That being said, your deal flow, and risk appetite at an insurance company is limited because of who you work for and whos money you are investing (exception - AIG).

From his experience, he says its the learning without all the beaurocratic political aspects, it just lacks the cache of being a major name. Just his opinion.

 

Insurance companies have IM divisions to hedge the risk in the products they are selling and the grow the surplus of their spread. They usually have a big core bond book as well as smaller holdings in private equity, hedge funds, equit, and real estate. These guys are long only so you probably won't end up at a hedge fund for your next job. Also if you want to be a PM at a equity fund then this isn't where I would start my first job. Wouldn't think a jump to mutual funds will be too hard after a few years working at an insurance company.

 

Insurance companies have a few relevant functions:

1- Treasury Department- typical of all companies (cash management etc)

2- Asset-Liability Matching- when an insurance company incurs a claim liability on its balance sheet due to an indemnity loss from a policy, the claim will not likely be paid out for many years. The insurance company purchases a bond with a maturity date equal to the actuarially calculated due date of the indemnity payment.

3- Investments- Insurers have access to virtually free money- they accept cash (premiums) and hold them interest free until a loss is incurred. This float is what drives Warren Buffett- the cash flow from Berkshire/Gen-Re/Geico's insurance/reinsurance activities. They do a lot of interesting things with this money. Some got crushed and became capital constrained when their surplus dropped along with their equity holdings. Others used a portfolio of CDS to profit immensely during the recent crisis.

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 

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for working as financial consultant need to clear exam. Degree is required for this. Based on the performance he will promote to sales manager

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Great thread. I'm interested in this as well as I have a couple of HY interviews coming up for the AM divisions at two insurance companies. These are total return, not long only.

A focus on the investment pitch (with maybe a sample) would be helpful if anyone is willing to share some insight. I'm at a credit rating agency myself so credit analysis is far from foreign for me.

 

My company is kind of a hybrid, we have a wealth management area that does client investments as a financial tool, we also offer the spectrum of insurance services. We have distinct investment departments, between wealth management and insurance investments, but the equity analysts assigned the various sectors have a hybrid role as portfolio managers too for various accounts whether on wealth management or insurance side. The fixed income insurance side operates more on its own given our wealth management client's FI needs are able to be handled by one person. Kind of different, but how it is structured seems to make sense.

 

I think they are competitive base salary wise, probably in the 50-60k range. Depending on the job, so similar to your BB like back office job if I am recalling the data correctly (anyone feel free to correct me). I work for a top 50 P&C company as far as premium revenues, but our location is a little outside your traditional finance hubs so my pay estimate might be a bit lower. Bonuses at insurance companies are more tied to P&C margins and are variable from company to company like a 5-10% different in bonus pay between where I am at and another company close by.

 
cheesebeans:

Middle Office/Ops pay starts off 50-60k and bonus is around 5-10k at my shop (Northeast/Top 5 AUM) but pretty good hours.

I'm in the midwest (smaller city) and I would guess the jr. investment analyst roles start ~$50k. I am not sure what their bonus structure is. I lateraled in at analyst level from a different industry.

"Give me a fucking beer", Anonymous Genius
 

Anyone know what type of bonus to expect? I am a second year FO analyst (left previous firm so will not be bonus eligible this year) and was wondering what to expect year end 2017. We are a top 15 firm in the north east with $80bn+ in aum.

 

What type of portfolio do they have? Is it a fairly sophisticated portfolio typical of an institutional investor? Would you be an investment analyst evaluating opportunities in their entire portfolio or just in a specific area?

 

Really depends upon what you're doing there. Most insurance companies split their investment teams into asset class groups (i.e. equities, fixed income, real estate, etc.). It also depends upon your role within that group. Need more information before I can provide a better answer.

In general, starting at a large insurance company can be a good way to get your foot in the door. They have well recognized brands and usually have good training programs.

 

Thanks to the both of you for replying.

They have a fairly diversified portfolio ranging from your plain vanilla value equity portfolio to private debt/equity to real estate. Basically the whole gamut of investment opportunities are included. The investment teams are indeed split into asset class groups (equities, FI, RE, PE etc etc) and within those asset class groups, they are further divided into sub asset classes (US growth, US value, EM growth etc etc).

As an analyst, I would be placed into one of these specific groups and will then be evaluating investment opportunities within that space. I.e. doing due diligence, research, modeling etc. Any specific groups I should be aiming for? (aside from my interests of course).

 
As an analyst, I would be placed into one of these specific groups and will then be evaluating investment opportunities within that space. I.e. doing due diligence, research, modeling etc. Any specific groups I should be aiming for? (aside from my interests of course).

Assuming you have any say, I would try to pick a group that 1) suits your interests 2) gives you a broad skillset / opens as many doors as possible. Working on any of the fixed income or equities teams would probably be a nice starting point. I would try to avoid something really specialized like some derivatives and commodities products.

That being said, if you have a strong interest in a specific area you should go with that. Sounds like a great place to start your career, good luck.

 

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