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Wednesday, August 19, 2026The Morning Brief →Sign in
General Account

Health insurers' investment income fell even as yields hit decade highs

Cash and Schedule BA income shortfalls erased the benefit of decade-high bond and dividend yields, according to NEAM's analysis in Insurance AUM Journal.

Mark Yu, Phil Lee and Eric Huang of NEAM's enterprise capital strategy team, writing in Insurance AUM Journal, have the numbers for 2025: U.S. health insurers collected less net investment income than in 2024, even as the yields on their bonds and dividend-paying equities reached decade highs. Income from fixed income and equities rose. Income from cash, short-term investments, and Schedule BA assets fell by more than enough to erase those gains.

The allocation picture explains part of the story. Bonds still dominate the balance sheet, at 56.0% of invested assets in 2025, down from a 60.6% peak in 2018. The reduction went primarily to equities and Schedule BA. Cash and short-term investments stayed the second-largest category, its share unchanged from 2024. Equities have held around 10% of invested assets for four years. Schedule BA has moved from 3.5% of invested assets in 2016 to a record 8.8% in 2025.

The fixed-income book carried its weight. Corporate bonds remained the largest sector, and insurers steadily increased allocations to structured securities. Credit quality and duration were largely unchanged. Fixed-income securities supplied more than half of gross investment income for the second consecutive year, supported by record-high book yields. Equities also added a larger share of gross income, helped by higher dividend yields and bigger allocations.

The income that didn't follow the yield

The net result: net investment income dollars fell from the 2024 peak, and the net investment income ratio declined as well. NEAM attributes the drop to the cash line and the Schedule BA line, a combination worth attention because those two buckets behave very differently.

Cash is the easier of the two to understand. Its allocation did not change in 2025, so the lower income contribution is a matter of yield, not size. A general account earning less on liquidity gives back part of the carry it picked up on longer bonds.

Schedule BA is more demanding. The category has more than doubled as a share of invested assets in less than a decade, so any income weakness now carries more weight than it used to. The write-up does not separate which Schedule BA assets produced less, and the aggregate data do not support singling out any private-asset class. What the data do show: health insurers added Schedule BA exposure in 2025 and took less Schedule BA income from it.

The lesson for allocators who run a liquidity sleeve next to an illiquid one: a higher-yielding book does not automatically produce higher net investment income.

A higher-yielding book does not automatically produce higher net investment income.

Schedule BA income is the swing factor for 2026. If it recovers, net investment income can rise even with book yields flat. If it does not, the industry will have traded liquid yield for private-asset exposure without a net-income gain — a trade that the next filing season would show.

Sources & further reading
Insurance AUM Journal
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