AB Dimensions Series

Translating Complexity into Opportunity

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Insurers seek value in all corners of the capital markets today. To assess opportunities fully, it’s critical to explore them from many perspectives: how they work, what makes them distinctive and where they fit within a broader portfolio.

AB’s Dimensions Series is designed to bring that clarity and context to increasingly diverse investment segments. In this edition, we feature residential whole loans, an asset class with the potential to enhance insurance portfolios—and the characteristics to make them a seamless fit.

Mortgage Credit, Rebuilt for Insurance Portfolios

Residential mortgage loans offer insurers a potent combination. They have the potential to enhance income, diversify corporate-credit exposure and boost capital efficiency. They may also help bolster liquidity profiles.

To help insurance investors tap the residential mortgage loan opportunity, AB tailors programs to each client’s balance sheet, capital and risk objectives. It’s a one-stop solution grounded in experience, disciplined underwriting, robust governance and comprehensive operational infrastructure.

Residential Mortgage Loans

Residential mortgage whole loans (RMLs) are emerging as one of the most compelling private, fixed-income-like allocations for US insurers. They combine a private credit yield premium with high credit quality and amortizing cash flows, while offering balance-sheet advantages insurers care about most: low risk-based capital (RBC) factors as set by the National Association of Insurance Commissioners (NAIC), amortized-cost statutory accounting, and Federal Home Loan Bank (FHLB) pledgeability that unlocks stable, low-cost contingent liquidity—features that are difficult to find elsewhere in private markets.

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Checking the Boxes: Why Mortgage Loans Fit Insurance Balance Sheets

Insurance companies have been longtime investors in residential mortgages. Insurers’ exposure, particularly in the US, has been through mortgage-backed securities We think privately originated whole loans offer more potent benefits.

While loans’ availability is increasing as lending continues migrating from commercial banks to asset managers and other private lenders. And a macroeconomic backdrop with a chronic US housing shortage and high borrower equity help fortify credit fundamentals.

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