The 30-Year Treasury Yield Just Hit a 19-Year High. Life Insurers Reinvest at Those Rates for Decades.
Life insurers generally benefit from higher rates, but there are some negatives to consider.
Overview
Life insurance companies like Prudential (NYSE: PRU) and MetLife (NYSE: MET) are generally very conservatively managed. That makes sense, since they take on financial obligations that can extend for decades, and they need to ensure they have the capital to meet them. This dynamic is an important part of why rising yields on 30-year Treasury bonds are largely a positive for insurance companies. Here's what you need to know.
Life insurance companies sell insurance that you don't actually want to use. In fact, you won't use it; your heirs, or whoever you designated as the beneficiary, will. That's a bit of an overstatement, since life insurance companies also sell retirement-oriented products like annuities. But the real point is the time frame that's involved. You generally buy life insurance or a variable annuity a long time before it will be needed.
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Originally published at www.fool.com.