NEAM's 2025 review measures the gap between yield and income

New England Asset Management has published its 2025 investment highlights for U.S. property/casualty, life and health insurers, pairing two numbers that general-account executives usually discuss in different meetings: book yield and net investment income. Book yield is the rate the portfolio carries on its statements; net investment income is what actually lands in the income statement after cash drag, Schedule BA income, and the rest of the non-bond machinery have done their work. The distance between the two is where allocation strategy gets tested.

The previous installment made the distinction vivid. As this publication reported in August, NEAM's analysis found that health insurers' investment income fell even as yields reached decade highs, with cash and Schedule BA income shortfalls erasing the benefit of higher bond and dividend yields; the bond math was working and the income line was not, a divergence a book-yield-only reading would have missed entirely.

Book yield is a slow, backward-looking measure, changing only as bonds mature and are reinvested, so it reflects what the portfolio used to earn more than what it is earning now. Net investment income is the current-year cash result that actually funds claim payments, policyholder benefits, and new-money commitments; when the two lines diverge, the difference usually sits in cash balances, Schedule BA assets, and the timing of private-market cash flows.

The 2025 report will likely be read for whether the health-sector gap repeats, and whether property/casualty and life insurers show similar splits, because the conditions that produced the health result were never unique to health plans. Schedule BA income is volatile enough to turn an otherwise solid year into a disappointing one, and cash balances can lag a book's embedded yield for a long time. If the 2025 data shows two or three sectors with the same pattern, the divergence is not a health-sector quirk but an operating condition of the general account.

The general-account context makes the timing useful: as this publication has argued, higher public yields have changed the private-assets math for insurers, driving rotation within privates rather than retreat, with structured credit and investment-grade private placements gaining and commercial real estate debt emerging as the latest rotation target. Those rotations show up in the income line more clearly than in book yield.

Plenty of industry surveys lead with yield because it is easy to compare across companies and quarters, but a general account can show a rising yield while its cash contribution falls, as the health data proved. NEAM is an SEC-registered investment adviser in Farmington, Connecticut, with an affiliate in Dublin and London regulated by the Central Bank of Ireland; its 2025 report is essentially a scoreboard for the general-account trade.

The yield line is what gets quoted in board decks, while the income line is what pays claims, and NEAM's own prior data has already proven the two can move in opposite directions. The 2025 review will show whether the health-sector divergence was a one-year quirk or the new operating rule; if the divergence widens across sectors, general-account allocations will need to be managed to net investment income rather than headline yield, and firms that already do that will have a reporting advantage over those that do not.