As we move through year-end reporting, municipal bond portfolios generally seem to be holding up better than expected. But insurance companies still may want to consider ways to help investors understand the exposure their portfolio has to this sector and the risk associated with the holdings.
Comments made on this topic during Traveler’s (NYSE:TRV*) fourth-quarter call by Jay Fishman, Chairman and CEO, put the challenge in context. As taken from the SNL transcript of the call, he noted:
“… there seems to be this bias amongst even sophisticated people to view municipal securities are all the same, as if somehow we own some prorated share of an aggregate monolith marketplace and that’s just not the case. Everyone understands that in the taxable fixed income world, the issuer and the specific terms and conditions of the instrument matter, and that’s equally as true in the municipal arena. …”
Travelers went on to discuss how they build their muni bond portfolio and how they view it, offering a model other insurance companies might consider adopting. They provide useful metrics in a supplemental presentation (see pages 22 and 23).
Even companies that already have released earnings might benefit by adding color to the discussion of their municipal bond portfolio in their 10-K.
* Note: InsuranceIR does not have a business relationship with Travelers
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